L&G, Sesame Bankhall Group and SimplyBiz Mortgages form climate change alliance
The aim of the group is to explain climate change legislation and engage with industry figures to provide guidance and help for advisers.
It is set to act as a source of support for intermediaries when dealing with green issues in relation to mortgage applications.
The companies have also been working with lenders and the Association of Mortgage Intermediaries (AMI) as part of this initiative.
Advisers seeking support have been urged to get in touch with their usual contacts at Legal and General, SimplyBiz Mortgages and Sesame Bankhall Group.
The collaborative also wants other distribution firms to join them and make themselves available to support advisers.
Michele Golunska, CEO of Sesame Bankhall Group, said climate change was a bigger issue than housing and mortgages alone, but acknowledged that new legislation would alter borrower choice.
“Mortgage advisers play a critical role in helping customers secure what is likely to be their largest ever purchase. We are focused on ensuring they are robustly supported to do so,” she added.
Kevin Roberts, director of Legal and General Mortgage Club, added: “We believe that collaboration will be key to addressing this hugely important issue. We have already been working closely with lenders and will soon be able to deliver educational content, available as structured continuing professional development pieces, centred on supporting the advice journey.
“But our aims extend beyond sharing practical guidance alone, and we are committed to ensuring advisers’ interests are represented among various government and trade bodies, while helping intermediary businesses develop their own sustainability guidelines. Our hope is that the industry will be inspired by our initiative, and we wholeheartedly welcome those who would like to join us in addressing this challenge.”
Richard Merrett, head of strategic development at SimplyBiz Mortgages, said the group was about ensuring advisers have a voice and are supported as they work to raise awareness.
He added: “We hope to create a positive culture around identifying the issues impacting consumers and giving clarity to advisers around what is entering their world, so they have greater opportunities to demonstrate expertise and advise on actions with their clients.”
Iress, Mortgage Brain and Twenty7Tec team up to standardise mortgage terminology
The technologies share data between broker software and lender portals with the aim to speed up mortgage decisions in principle and application processes.
The firms hope to remove barriers and any misconceptions brokers have around embracing technology by standardising the language and terminology used.
It is also supposed to make the platforms easier to use and improve the customer journey.
This will be enabled with Mortgage Connectivity, a program which is already used by 20 lenders to encourage consistent data transfer. The collaboration has been supported by Accord, Leeds Building Society and TSB, who will review the way their technology partners communicate with brokers too.
Davie Miller, Iress’ executive general manager, commercial, said: “To date, lenders and technology platforms have used a wide variety of terms to describe the same process. Clearly this is hugely confusing for brokers and can block the wholesale adoption of processes that can significantly improve the speed and efficiency of mortgage applications and decisions.
“It’s a problem faced by the whole industry and coming together as an industry was the only way to solve it.”
Nathan Reilly, director of lender relationships at Twenty7Tec, said education and collaboration were both essential to efficiency and time saving.
Neil Wyatt, Mortgage Brain’s sales and marketing director, added: “It is crucial that we work in collaboration when it comes to ensuring we are able to deliver the best possible outcomes for end users, regardless of the product, the technology being used, or the size of the firm using the technology.
“We are excited about how this will help and support individuals and firms across the marketplace adopt the available and developing technology and ultimately drive significant customer benefits.”
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said: “AMI has advocated for some time the need for technology firms to work together to provide solutions that embrace more of the customer journey.
“This collaboration between our three main sourcing engines has to be seen as really positive and hopefully the start of a longer journey.”
Top 10 most read broker stories this week – 11/03/2022
Commemorating a decade of the Association of Mortgage Intermediaries and how to better engage with clients were stories which also held readers’ interest.
Mortgage rates rise as lenders pull deals off market – Moneyfacts
Just Group posts pre-tax loss of £21m following lifetime mortgage disposals
Landlords brace themselves for higher rates with longer term fixes, brokers say
Buy-to-let sector is ‘changeable lending environment’ – Armstrong
A decade of AMI: The biggest achievements, changes and upcoming challenges – Sinclair
Brokers still lean on their own knowledge with the aid of sourcing tools – Marketwatch
Swap rate and mortgage price environment is a complicated picture – Gee
Rising house prices spark interest in affordability – Firth
Brokers reveal how a market niche sent business booming
Engaging with clients is priority #1 for advisers – SimplyBiz
Brokers left to ‘clean up’ execution-only regrets – analysis
Malcolm Davidson, managing director of UK Moneyman, said this was a common issue evident by the engagement he received on social media posts about it.
“I put it on [social media] once a year or so – I always get loads of responses,” he added.
He said most borrowers likely completed a product transfer independently with few problems, but for those who made mistakes the consequences were dire.
Davidson has called for the execution-only process to be scrapped or for lenders to mandatorily ask customers to consider independent advice.
Andy Lawrence, mortgage and equity release adviser at ALL Financial Advice, said these mistakes could be because borrowers do not understand or check mortgage terms and conditions.
He said as lenders were getting in touch with clients before brokers offering attractive rates and waived early repayment charges (ERCs), this created a sense of urgency.
Lawrence’s firm has a client retention rate of 95 per cent but of those lost to lenders, some returned with complaints about the terms of their self-selected mortgage.
Some brokers claimed to see five regretful clients a year and others said as frequently as one per month.
Davidson said his most recent example was a client who switched even though they knew they were separating from their partner. They did not realise refinancing would trigger a £10,000 fine once the property had sold.
He said: “They told me they are putting in a complaint but against who? Themselves?”
Another client was offered to switch early with no ERCs. Davidson said: “I just don’t think that’s fair. That’s not a level playing field for brokers if they waive the ERCs. We missed the remortgage opportunity with that particular customer.”
The client got back in touch a few months later, now pregnant and wanting a further advance to build a bedroom.
“The lender in question declined the further advance. And that led to a £3,000 early payment penalty when they got me back involved to remortgage,” he added.
Lawrence said he had seen a case where a client had been invited to switch five months early to enter a five-year fix at 2.64 per cent.
The client’s equity put her at an exact loan to value (LTV) of 80.12 per cent, meaning if she made one more repayment, she would have fallen below the 80 per cent tier and qualified for a cheaper rate of 1.89 per cent.
Lawrence said: “Just by waiting literally a couple of weeks to take her into the new month, we basically saved £3,206.51 a year, which meant over the five years, the saving in total was £16,032.56. She was like, ‘Well, why didn’t the lender make me aware of that?’ and I’m saying, ‘you’re not getting advice from the lender’.”
Mike Roberts, independent financial adviser and Helen Bowsher, independent mortgage adviser at Penny Matters, said they were constantly having to deter clients away from unsuitable decisions.
Roberts spoke of a client who had to be stopped at least three times from going direct as they wanted to move in the future and their circumstances would no longer fit criteria.
Bowsher said another self-employed client had transitioned from being a sole trader to a limited company and did not have enough history of being the latter to satisfy lenders.
She recently advised other clients against refinancing onto a lower priced product without a consent to let aspect, as the lender loaded such changes with fees.
“I said to the client, ‘I know this mortgage is more expensive, but in the future, it’s going to fit your needs’,” Bowsher said.
Borrower misunderstandings and ease
Brokers were finding borrowers also did not know that going direct meant cutting their adviser out.
Lawrence said he had clients apologise to him after conducting an execution-only transfer because they assumed he would be paid for the business.
Bowsher and Roberts said others saw the mortgage loans as theirs to use how they wished, not realising they would need to be reassessed if circumstances changed.
Execution-only products requiring less documentation and checks also had an appeal, brokers stated.
This plays into the ease with which modern consumers select financial products online. However, penalties attached to other poor choices were much less significant, brokers added.
Lawrence also raised concerns about consistently breaking a fixed term early.
He said: “What we’re trying to make the client aware of – especially if they paid £1,000 worth of arrangement fees – is by switching early, say six months on a two-year fixed rate, you’re losing 25 per cent of your fixed rate.
“If they keep on doing that, every couple of years over four remortgage transactions, they’ve lost two years in total, which they’ve paid for each time. So, it’s not always right.”
Rob Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), also raised concerns on this saying: “There’s normally a reason that the broker has put them into that particular product after giving advice.”
He said breaking early could be seen as giving bad advice if done by an intermediary.
Broker responsibility and caseload
Allowing borrowers to refinance with minimal advice signalled a move away from the intentions of the 2014 Mortgage Market Review, brokers said.
Davidson said: “In my opinion, the broker community has let down consumers by not being vocal enough on this matter. I think the majority of us do agree that there are some borrowers out there that need to be protected from themselves and whilst I can definitely see the argument, I still believe the non-advised sale flies in the face of the spirit of the Mortgage Market Review.”
Lawrence wondered why brokers should be left to clean up the mess.
He added: “I often say to my clients ‘I’m quite happy to re-engage with you, but what I don’t want is two years down the line, you go back direct to the lender and create another mess’.
“Because all we’re doing is being troubleshooters.”
However, all agreed that consumers should have the freedom to make financial decisions independently within reason.
Lenders should do more to urge borrowers to seek advice if their circumstances change, brokers said.
John Ahmed, managing director of Movin Legal, added: “If [lenders] have had a client sent to them by a mortgage adviser or regulated individual, they should not be allowed to do a product transfer until that individual is sent back to the adviser.
“Then the adviser should reassess and see if an [independent] transfer is suitable.”
Bowsher said some were already doing this in written communications.
Mortgage Solutions contacted some lenders to find out what the execution-only process looked like.
Santander approaches borrowers three to four months ahead of their fixed term ending.
A spokesperson said: “These letters advise customers that they can follow an execution-only process, speak to us directly or work through a broker – the mortgage products available are the same regardless of the channel they use.
“This letter includes a detailed Q&A running through what a customer can do if they want to change their mortgage in anyway.”
Any customer choosing a mortgage online is asked to call Santander if changes could occur within the next six months such as additional borrowing, moving home or overpayments.
It also tells them that choosing mortgages online means the suitability has not been assessed.
The bank displays penalties charged if the term is ended early or overpayments are made.
Borrowers have 14 days to consider all mortgage offers, advised or execution-only, and Santander’s advisers are on hand throughout the application.
Barclays said a mortgage information sheet was provided setting out the terms of the product, as this is legally required.
Customers can speak to a Barclays adviser if they have questions, the bank said.
Barclays said it was mandatory to ask borrowers about a change in circumstances and customers are bound to the terms of the mortgage from the day it completes. However, they can change their mind up until that point.
Santander said it did not see an increase in complaints relating to execution-only and both banks said they had complaints processes in places should borrowers need them.
LLLE2022: Later life industry standards go beyond regulation – Hanifan
Speaking on a debate panel following a presentation from David Burrowes, chairman of the Equity Release Council, Rob Sinclair, chief executive of the Association for Mortgage Intermediaries (AMI) said the UK’s financial services had the “most aggressive regulator” in the world.
“Yet in spite of that, we have a situation where we add more standards on top of that in order to make our consumers feel safe,” Sinclair said.
He said it was an “interesting conundrum” that on top of existing regulatory standards, the sector went above and beyond that.
Sinclair said the negative of this was it proved a “huge responsibility on [advisers] because what you effectively do is gold plate everything and create an incredibility high standard for yourself that you have to live to.
“You have to live it and adhere to it. The majority are really good at it, the problem is others aren’t.”
Sinclair said the later life market did not have the same “rinsing out” of bad advisers as the mainstream market did, referencing the 2,000 intermediaries who exited the market between 2012 and 2014 due to poor behaviour.
Standards of the past
Tish Hanifan (pictured), co-founder of the Society of Later Life Advisers (SOLLA) said she and joint co-founder of the organisation James Gardiner helped the Financial Conduct Authority (FCA) to develop its regulations for the market in 2004.
She said: “My reflection on that is when we wrote those standards, we were writing for the market we had at the time.”
Hanifan said the innovation created through product development, as well as standards set by SOLLA and ERC, meant there was a “massive change” in equity release and the later life market.
She said these additional standards were necessary because she still came across some negative views of equity release on social media relating to their original launch in the 1980s, indicating that “the consumer has a long memory”.
Hanifan added: “The regulatory regime as it is – the consumer can’t wait for those changes. They want them, they need them, but right now how does the consumer find people that can help them with later life lending?”
Hanifan said this was her reasoning for setting up SOLLA, to give consumers confidence and connect them to “good advisers” who were following a recognised set of standards.
She also said removing siloed advice could improve outcomes for borrowers.
“When people come to see advisers, what they want is for their problem to be solved. They are not interested in why an adviser is limited in the advice they give or why they didn’t consider certain options,” she added.
AMI to hold debate on diversity and inclusion report
The survey was launched in July and consulted the industry for views on people’s perceptions and lived experiences of diversity and inclusion.
The virtual debate will be held on 24 January at 11am and will allow attendees to ask questions about the research behind the report as well as ask AMI what the industry plans to do next.
Robert Sinclair (pictured), chief executive of AMI, will be presenting at the event.
Nicola Goldie, head of national accounts at Virgin Money, Andrew Montlake, managing director of Coreco and Dom Scott, managing director of Alexander Hall will also take part in the discussion.
To register, please visit this link: https://www.workcast.com/register?cpak=4559736562674278
Covid-impacted self-employed clients with credit blips demand advice and manual underwriting, say brokers
In the last in a video series of four in association with The Mortgage Lender, Greg Cunnington said: “I have a client I’ve dealt with for ten years. He runs a cool business, he designs restaurants, shops and bars all over the world. He took six months off because there was no work globally and it was costing him money to keep the office open. He’s now back up again, with record numbers coming through in Hong Kong. He thought getting a mortgage would be really easy.”
Cunnington explained the client’s existing lender is a top six provider who won’t take the case ‘in a million years’ due to the work break, despite the fact the client’s a great credit risk.
He added that some mainstream lenders are stepping up for the self-employed including Halifax which was doing a lot of ‘common sense underwriting’ on self-employed cases, also mentioning HSBC and Barclays, but TML’s sales and product director Steve Griffiths outlined the specialist lender’s point of difference.
He said: “The example Greg gave there about the customer who closed up for a bit and had a hole in his recent set of accounts. A limited number of mainstream guys would say yes, that’s not a problem. What that means is, as a specialist lender you want to be number three on the recommendation list who will definitely do the deal. I guess that’s the space we’re moving back into again. When you are looking at Covid-income impacted clients, you’re looking at a very short list of mainstream lenders – maybe just one.”
For more on the debate, watch the video below.
Our video panellists include Steve Griffiths sales and product director, The Mortgage Lender, host and group editor of Mortgage Solutions, Victoria Hartley, Greg Cunnington director lender relationships and new homes at Alexander Hall and Andrew Montlake (pictured), managing director Coreco Mortgage Brokers and chairman of AMI.
Sponsored content in association with The Mortgage Lender.
‘Avoid the commoditisation of mortgages and poorer customer outcomes’ – AMI chair Montlake
In the managing director of Coreco Mortgage Broker’s speech at the trade body’s annual dinner, Montlake said: “We have fought your case around escalating fees, with some big successes, whilst other successful battles and negotiations have been carried out behind the scenes, with always the focus remaining on the need for quality advice and the wellbeing of consumers.”
He added: “We are a consumerist industry after all, and it is important to clarify that being consumer focused can still put us at odds with the concept that cheapest is always best. For many of our clients, cheapest would most certainly not be best and we must avoid the commoditisation of mortgages in a way that will inevitably lead to poorer customer outcomes.”
He added greater technology use should strip out inefficiencies but not at the expense of sensible process and proper advice.
“Every so often I read a quote somewhere that basically says a new firm or product is here to fix this broken, unfair industry. It’s often from those who really do not actually have much experience or care about the industry to which they refer. It is important that they are not the only voices government and regulators hear.
“My view is the industry is not broken. It is one of the best run and well-regulated industries in the UK, with a rich vein of talented, professionally qualified and dedicated advisers passionately working all hours for the benefit of their clients,” he said.
“Stats show we are trusted, appreciated and our clients come back time and again to receive good advice. We can all improve, but we are never broken.”
Montlake drew attention to the guides issued by the trade body this year, spanning Brexit, vulnerable customers, and operational resilience. He also flagged the assistance the firms had given advisers with the senior managers regime, PI Cover or claims from notorious claims management firms.
The dinner, which was both the 2020 and 2021 dinners rolled into one, was hosted by Mortgage Solutions’ parent company AE3 Media and sponsored by TSB.
Montlake added: “I would like to thank my predecessor Martin Reynolds for all his personal help and advice, as well as conveying his intense happiness that he managed to miss out on his speech last year.”
Younger borrowers keen to talk protection since Covid – AMI report
A report from the Association of Mortgage Intermediaries (AMI) called Protection: Moving Forward confirmed 40 per cent of 18-34s say they would consider income protection as a result of Covid-19 where they might not have before – twice as many as those in the 35 to 54 age bracket and ten times higher than the over 55s.
The poll of 5,000 consumers and 250 mortgage brokers supported by Legal and General and Royal London also showed 18 to 34 year olds think income protection is just as important as buildings insurance.
The research also showed over half of protection discussions have increased and one in four of those advisers are referring to a protection specialist, up from one in seven last year. Of those asked, 99 per cent of advisers are now raising protection with their clients when discussing mortgages and a quarter are passing them onto protection specialists.
The question of cash
Contrary to popular belief, cost isn’t the main reason consumers don’t buy protection from their broker – most don’t think they need it. However, where 99 per cent of advisers say they raise protection, up to two thirds of clients don’t remember discussing it.
Julie Scott, chief commercial officer at Royal London, said: “It’s motivating to see that nearly two thirds of the mortgage advisers surveyed have noticed an increase in their protection business since the start of the pandemic.
“This has created awareness of vulnerability in society, particularly in relation to health. Consumers now understand that a life shock can happen out of the blue.”
On the optimal time to raise the protection discussion when in front of the client, 30 per cent of advisers raise it at a specific point during the interview where 70 per cent don’t formalise the process.
Emma Walker, chief marketing officer from Lifesearch, said: “It is interesting that brokers choose to raise protection at different points in the advice process and that there is no obvious method that is more successful. Perhaps the most important issue is ‘what’ is said, rather than ‘when’ it is said.”
It appears that context for the conversation also remains key.
Stacy Reeve, senior policy adviser, AMI said: “Our research shows that those advising on a mortgage are in the ideal position to raise protection – for consumers that bought protection cover, a new house purchase was the top trigger for all protection products. So why have such a small percentage of consumers purchased protection insurance via their mortgage adviser given their role in facilitating the house purchase?”
FSCS levy cut to £717m for 2021/22
This was because it no longer needed to invoice the retail pool for the £116m it expected to cover claims made against the investment provision sector.
Each financial services category was expected to contribute £9m to make up for the self-invested personal pension (SIPP) operators breaching its annual levy limit of £200m. However, claims against the sector were £106m lower than forecast and many are yet to be processed with the Financial Ombudsman Service.
The FSCS now expects these claims to come through during the 2022/2023 financial year and does not expect to raise any more levies this year.
The Association of Mortgage Intermediaries (AMI) said it was surprised that the retail pool had been deferred to next year. It was also shocked that the Financial Conduct Authority (FCA) had not been asked to invoice an interim levy as part of this year’s costs.
Robert Sinclair, chief executive of AMI, said: “AMI is pleased to see that the FSCS does not need to invoke the retail pool for financial year 21/22, so avoiding an interim levy on mortgage and protection firms in the new year.”
The indicative levy forecast for 2022/2023 is £900m. This includes £400m relating to compensation for failures that have not yet occurred.
Mortgage broker levy
Mortgage advisers paid £3.6m for the financial year 2021/22 and this is forecast to fall to £1.5m for the next financial year.
However, the sector may need to contribute £7.7m towards a retail pool to cover the life distribution and investment intermediation (LDII) sector.
The LDII sector is predicted to breach its £200m annual levy limit next year and require funds from other sectors.
AMI said the prospect of the retail pool being added to next year’s bill was still “uncertain”.
Sinclair added: “For 22/23 we remain concerned about the costs being transferred from bad behaviour in the pensions and investment markets on our innocent member firms. The continuing retail pool liabilities being added will not be charged until later in 2022, but this guillotine hanging over the heads of mortgage firms is stressful and unwelcome.
“We are concerned that 73 per cent of the FSCS costs come from advice more than five years ago. This means that any actions taken by FCA today will have limited short-term impact. The industry needs a better solution to this compensation mess.”
“AMI stands ready to work with the FCA and FSCS to establish a better and fairer funding mechanism for the FSCS. Previous work on the scheme has seen the FCA at its best in promoting constructive debate. We hope the doors to a new debate will be opened soon,” Sinclair added.