Speaking to this publication, Stephen Brown (pictured), head of intermediary sales at Scottish Building Society, said the English housing market was “one of the largest and most stable housing markets in the world”.
The Scottish housing market it covers is worth around £10bn to £12bn, whereas the English market it is looking to target is around £60bn to £70bn, presenting an opportunity for growth.
Scottish Building Society had entered the English housing market around three years ago, starting in the North of England as a “test case”, he explained.
Brown said: “It was tremendously successful. We got some fantastic feedback from our brokers, particularly around our unique approach to lending and the way that we do things. We’re very flexible from an underwriting perspective, and we discovered quite quickly that we were generating inquiries from out-of-area brokers.”
He continued that following feedback from brokers who wanted the mutual to move further South, it had “pushed the line” covering as far South as Oxfordshire, which would allow it to take its “unique approach to lending to more customers and more brokers and more customers, and help more people”.
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Brown said that it did not curently cover Wales or London, it would possibly consider entering these markets at some point in the future.
Brown said the mutual currently had three field business development managers (BDM) and two telephony BDMs, with two dedicated to support England, Nick Watkin and Liam Reid. He added that Scottish Building Society was advertising to hire a business development manager (BDM) for the Midlands, and it was “looking to recruit”.
“For me, our team are all battle-hardened BDMs. They’re very experienced. They’re very focused on broker service. I need to make sure that I get someone at that level, but absolutely, we’re looking to recruit in that area.”
He added that it had partnered with around 23 mortgage networks and five mortgage clubs and was “able to support brokers of any shape and size”.
“We like to think that we can get a broker registered and up and running within 24 hours. We’re really focused on that, and we have a team solely dedicated to broker support in terms of registration and using the mortgage sales and origination (MSO) platform, which was one of our bigger investments as a business over the last few years, to help support brokers.
“I think so far as the distribution strategy is concerned, we are absolutely focused on face-to-face brokers. They want to see us face-to-face because it is a little more complex what we do, and we’re out there in the market having dynamic face-to-face discussions every week. We can support by telephone and Microsoft Teams, but we would much rather meet someone in person, where we can just help them understand what it is we can do for their customers,” Brown explained.
First-time buyers and later life lending key areas
Brown continued that it would be targeting first-time buyers and later life lending markets, pointing to its approach around pensions, end-value remortgages and limited guarantee mortgages as important USPs.
He explained that the mutual could use undrawn pensions to evidence or support borrowing, which would help support later life borrowers who may not have the income for a mortgage, but their pension could augment their affordability.
Brown said that this was a “hugely growing cohort” and was expected to grow further in the future.
“There are now many hundreds of thousands of borrowers who are in that category of in their late 40s, 50s or 60s, who have a very good pension and they want to either buy or remortgage or finance, but because of the restrictions on retirement age set by a lot of lenders, the term is short, and therefore causing an affordability constraint.
“What we do in that situation is we will bring the pension to bear on that problem and use that to bolster affordability and we’re really starting to see traction among a growing broker cohort who want that.”
The end-value remortgage allows borrowers who are developing a property or improving it to use the end value to set the loan to value (LTV) and the product can then be used for a “whole range of situations”.
“One that’s going to become very topical is greening your property, so if you want to install heat pump or solar panels or insulation, which can be very expensive but adds a lot of value to your property, we will work off the end value and set the LTV based on the end value, so you’ll be eligible, potentially for a lower rate, and it will reduce the cost of that,” Brown explained.
He continued that its limited guarantee means that guarantors are only “on the hook for the top-up amount” rather than with a joint borrower sole proprietor (JBSP) mortgage, which puts a guarantor on the hook for the whole mortgage.
As an example, a limited guarantor would only be “on the hook” for £20,000 if that is the top-up amount necessary.
Brown added that this could be unwound at any time without tampering with the title deeds of the property and the title deed is in the borrower’s name.
| Case study | Explanation |
| Scenario 1 | We helped a borrower support borrowing on an unencumbered property currently worth £1m, looking to raise £660,000 for significant home improvements, because we work on the end value, this lifted the effective valuation to £2m and we are able to release stage payments with an initial release of £500,000. |
| Scenario 2 | We helped borrowers finance a mansion house currently structured as two leasehold flats. The property was converted back to one main residence with the titles merged to a freehold on completion. |
| Scenario 3 | We helped the borrowers with a property that is undergoing significant refurbishment. The current valuation was difficult to ascertain as it had now reduced in value, due to the rip out works that had commenced and the property was actually classed as uninhabitable. We raised £500,000 on the current residence, that was unencumbered, to fund the refurbishment works – full release upfront.
Once the second property is completed, and subject to building regulation sign off and planning consent obtained, the mortgage can then be ported from the current main residence once sold to the newly refurbished property. This shows our cross-security flexibility. |
| Scenario 4 | The remortgage of an unencumbered property to refurbish an outbuilding to be used as an AST / let out. On completion, the title is being split to remove the outbuilding building, along with five holiday cottages that were within the current title. |
Brown said that there had been an “explosion of first-time buyer activity” in the building society sector in the past few years, with mutuals accounting for around half of all first-time buyer lending last year.
He continued that the Scottish Building Society was “very adept” at assisting first-time buyers, pointing to the fact that it doesn’t use credit scoring, which can penalise first-time buyers as they have little or no credit on their file.
“That’s not a bad thing. They could have been busily saving their deposit in the background, and they didn’t want to build up a lot of credit for us. That’s okay, we don’t hold you to a minimum standard as a first-time buyer,” Brown added.
He said that the first-time buyer space was competitive for building societies as there are “so many great lenders out there who offer so many solutions”, so it can be “very difficult to feel different to a broker”, but he was optimistic.
English property chains are longer and unusual properties are different
When asked about key differences between the Scottish and English housing markets, Brown said that in Scotland there was a home report, produced for every transaction, which is produced by the seller for the benefit of the buyer.
Another key difference is the conclusion of the missives and buying processes connected to missives which means that gazumping and gazundering are not common in Scotland, and to work in the English market some changes have been made to their process, he noted.
Brown said: “We probably found in England that the chains are longer, and therefore cases do take longer to come to fruition, and so we’ve had to look at things like our offer validity period, which we had to extend to support English borrowers.”
Another aspect is unusual properties, as in Scotland unusual properties tend to be high-acreage properties.
“The list in England is probably a bit different in terms of the kinds of property that we’re seeing, so we’ve had to adapt our approach to the English market. But the principles and the fundamentals that remain the same, we haven’t put in a tick-box approach to the differences in the process. We will absolutely view them case-by-case, and we have experienced underwriters who will look for a solution rather than just putting in that kind of blanket set of policies.”
