Standard Life Home Finance partners with Primis Mortgage Network
The addition will fortify Primis’ existing later life proposition and help advisers who are looking to expand businesses within the equity release market.
Members will have access to the entire suite of Standard Life Home Finance products, which covers a range of loan to values, and includes drawdown as well as lump sum options.
Standard Home Life Finance will provide guidance on its product range to support advisers as they speak to their clients.
Primis also has a relationship with Air Sourcing, part of Key Group, allowing members to service their clients’ entire later life needs.
Vikki Jefferies (pictured), proposition director at Primis, said: “As more people look towards later life lending to support their needs, this partnership means we can provide advisers with the products and services that suit their clients best. We recognise advisers as being the future success of the market and we are confident that Standard Home Life Finance’s expertise and support will be a valuable addition to our panel.”
Kay Westgarth, head of sales at Standard Life Home Finance said: “Our partnership is another step in growing our later life lending offering. We’re pleased to work with them to expand their panel offering and support their members.”
UK economy boosted by £3.8bn in GVA from equity release – L&G
GVA is the difference between the value of input, the materials, that go into a process, and the value of the finished product.
For example, if you spend £20 on wood and nails, then build a chair that is sold for £50, then you’ve added £30 in value during the process of building the chair, which is the GVA.
In the case of equity release, the input is taking the money out of your home, then spending it, the process, thus putting it back into the economy, the output.
Cash accessed through equity release indirectly supported a further £1.1bn in indirect effects, which are the increases in employment and economic activity along supply chains, and £900m in ‘induced’ effects, which include increases in employment and economic activity from increasing spending power of employees.
This amounts to nearly £3.8bn, according to Legal and General’s Equity Economy report, conducted with the Centre for Economics and Business Research (CEBR).
The study found that for every £1 of equity released via a lifetime mortgage, or other equity release product, £2.12 in GVA is supported across the UK economy. The report estimates the positive impact of equity release across supply chains and to employees supported just under £2bn in GVA in 2021.
A record £4.3bn was released in 2021 via lifetime mortgages and other forms of equity release, according to the report, representing an 11 per cent annual increase.
This money, previously tied up in bricks and mortar owned by the over-55s, was then spent directly across a range of sectors as homeowners supported family members and boosted their incomes with the extra funding.
The wholesale and retail sector saw most of the cash, at 18 per cent, or £757m, and the human health and social work sector got 12 per cent at £517m. The real estate and construction sectors received £356m and £417m respectively.
Spending funded directly by equity release generated more than 45,000 jobs. A third of this, 15,300 roles, are in the health and social work sector due to the high spend on care costs. Taking into account the indirect supply chain effects, and induced effects of this spending, modelling by CEBR estimates that an additional 35,000 jobs are also supported.
Craig Brown (pictured), chief executive of Legal & General Home Finance said: “With the property market continuing to boom, the value held in the homes of the UK’s over-55s is both significant and growing. The later life lending market has also grown in tandem, with improved standards and advice over the past decade.
“Our research demonstrates that a growing number of people will look to their property wealth to fund their lifestyle, particularly in retirement.
“However, the impact of the equity release market is more significant than just the spending power it gives to the individual homeowner: it funds businesses, creates jobs and makes a positive contribution to the UK economy.”
Since 2015, Legal & General has helped over 108,000 customers release more than £6bn in property equity.
Cost of living crisis will increase dependence on Bank of Mum and Dad – Saga Equity Release
A quarter of parents with adult children said they would be supporting them in the coming months, according to a survey of 2,000 people by Saga Equity Release.
Up from 20 per cent two years ago, the current proportion is expected to stay stable over the coming year.
Cost of living crisis has greater impact than Covid
Around 64 per cent of parents said they expected the cost of living crisis to have a greater impact on their children’s finances than the pandemic, pointing to rising bills, low savings, and increasing rent and mortgage payments.
The report adds that a quarter of respondents expect to support their children more now that they did during the pandemic.
The pandemic and the cost of living crisis has led to many over-50s reevaluating their inheritance plans, Saga said.
Saga reports that under a quarter, 24 per cent, of respondents said the cost of living crisis had made them reconsider their plans to share their estate with family.
Around 15 per cent said the cost of living crisis could lead them to gift money, compared to the 12 per cent who gifted money during the pandemic. The average gift is nine per cent of their estate.
Five per cent of over-50s were considering equity release, which rose to 13 per cent for those aged over 80.
The amount drawn down by equity release customers has also increased by 12 per cent since 2020.
Alex Edmans, head of retirement at Saga Personal Finance, said: “The last two years have been unparalleled in terms of the impact on our finances, with further challenges on the horizon.
“The Bank of Mum and Dad was a critical lifeline for many people during the Covid-19 pandemic, and our research points to a growing dependence on family support as inflation continues.”
He added: “As dipping into savings or investments becomes less realistic in the cost-of-living crisis, more parents are now considering different approaches to inheritance – be that fast-forwarding plans, gifting sums of money or releasing equity from their homes. We could see permanent changes to attitudes towards inheritance as a result.”
Equity release plans treble in a year
There were 1,557 plans available at the end of the first quarter of last year, from 547 in the same period of 2021, according to Key Partnerships.
As well as an increase in plans, the referral arm of Key Later Life Finance said there has been increased innovation across the market over the past 12 months.
All equity release customers can now make penalty-free partial repayments following the stipulation by the Equity Release Council earlier this year.
Last year, roughly 60 per cent of customers could partially repay loans without being charged.
Fixed early repayment charges, which make it easier and more affordable for customers to switch loan, are currently a feature on around 979 plans or just over 60 per cent of the market, according to Key Partnerships.
Other plans also include downsizing protection, lending on sheltered properties and allow interest payments.
Jason Ruse, business development director at Key Group said: “The expansion of the number of plans available on the market has been remarkable with the last year seeing the number nearly treble.
“Developments in the market and the innovation in product design reflect the growth in lending and the demand from customers for more flexibility underlining how equity release has become a true later life lending market.
“The rapid widening of choice emphasises the importance of expert independent advice for customers and the need for advisers to stay up to date with what is a growing and fast-changing market. Advisers who do not regularly work in the market should consider whether setting up a referral relationship might not be a better idea.”
Financial planning and retirement aspirations motivate equity release use
Standard Life Home Finance’s ‘Lightbulb Moment’ research polled 418 people who had taken out equity release and a further 94 who had enquired about it, but subsequently declined the product.
It found 32 per cent took out an equity release product because they wanted more out of life and realised they would need extra money. A further 17 per cent opted for the product because they always knew their pensions and savings were not enough, while 11 per cent realised their savings were not sufficient after some consideration.
In total, half of the respondents sought equity release either to boost their income or to fulfil aspirations.
Some eight per cent said their choice in equity release was sparked by a life event which had hindered their original retirement plans and 11 per cent said they were inspired by family and friends needing their support. Some five per cent took equity release as they did not want to carry on working, but needed the money.
Of those who eventually chose equity release, two-fifths took the time to consider their options. Some 19 per cent said that before taking equity release, they felt confused as they did not know how to acquire the necessary funds.
Around 18 per cent said prior to getting equity release or another kind of financial product they knew how much money they needed but did not have it.
The decision to take out an equity release product was not immediate for all respondents as a quarter thought about downsizing first before settling on equity release. A fifth considered using their savings.
Some 17 per cent thought about working for longer and 19 per cent considered taking out a personal loan.
Although they did not end up choosing equity release, a fifth of those who declined the product were initially encouraged to enquire because they knew their pensions and savings were not enough. Some 17 per cent asked about the product due to a life-altering event.
The study also found that those who did not take out an equity release mortgage tended to be younger.
Equity release is a ‘financial planning tool’
Kay Westgarth, head of sales at Standard Life Home Finance, said: “While historically some people have been comfortable pigeon-holing equity release as a product of last resort, speaking to customers who have taken out equity release or seriously considered this option, you can clearly see that this is not always the case.
“Instead, it is frequently being used as a financial planning tool, a springboard to achieving retirement ambitions or an opportunity to support the wider family.”
Westgarth added: “While a good adviser will run through all of a customer’s options at their appointment, it is interesting to note that even before they speak to someone many people are aware of the different choices they face. Specialist advice is still vitally important but working with customers who have already started to think about their options makes the advice process smoother.”
Will Hale, CEO of Key Later Life Finance, said: “Despite initiatives such as automatic enrolment, increasing numbers of people are finding that what they have saved into pensions and other investments is simply not enough to allow them to achieve their wants and needs in later life. Therefore, it is not a surprise that the Standard Life Home Finance research released today highlights that the desire for a better quality of life in retirement and the need to manage a funding shortfall is driving customers to explore equity release as an option.
“That said, it is interesting to note that many customers had already started considering options such as downsizing or working longer to make up the shortfall before speaking to a financial adviser. Rather than being a knee-jerk reaction, taking out equity release is a choice which is made after significant consideration and with the support of a qualified, specialist adviser.”
Top 10 most read mortgage broker stories this week – 13/05/2022
The equity release market also came under scrutiny following a research paper by The Financial Services Consumer Panel, and Habito and Perenna said that the affordability stress test and loan to income limit was “not fit for purpose”.
The Queen’s Speech, brokers’ biggest careers lessons and insights from Coreco’s Andrew Montlake also caught readers’ interest.
The British Mortgage Awards 2022 finalists announced
Equity release borrowers lack understanding and feel pressured to buy – report
Coreco sets sights on commercial, new build and equity release ‒ Montlake
‘Shovel through the dung to find a gem’ – brokers share their biggest career lessons
Habito and Perenna say current affordability stress test and LTI limit ‘not fit for purpose’
HSBC launches emerging talent event to support rising star brokers
Nationwide ups LTI to 6.5 on like-for-like remortgages
Planning system to be reformed ‒ Queen’s Speech
Brokers ‘frantic’ after BoE rate rise as borrowers worry over mortgage costs
Rate increases announced by HSBC and Nationwide – round-up
Equity release study offers a snapshot but highlights need for more data – analysis
Andy Wilson, director of Andy Wilson FS, said the Financial Services Consumer Panel’s study sample size of 45 respondents was “very small” compared to the more than 40,000 borrowers who engaged with the later life sector last year.
The qualitative research found that while borrowers who engaged with the equity release market had mixed feelings, many would have liked to discuss other later life finance options further or be given access to more information.
Andrew Gething, managing director at MorganAsh agreed that the sample size was small and said it consisted of people who were paid to take part, adding this was “not truly representative”.
He said: “However, the research remains valid and this calls for the industry to collate far better data on vulnerability and consumer outcomes.
“This means the systematic recording and objective assessments of consumer characteristics as well as outcomes, in order to provide reliable data for all parties and fundamentally ensure that the customer is always given the right advice and provided with the right product for their needs.”
David Burrowes, chair of the Equity Release Council (ERC) welcomed the study and its recognition of where existing market standards had contributed towards successful outcomes.
Representatives from the ERC’s main and standards board were involved in the study. The summary of findings was shared with them, and they provided additional insights.
Burrowes said: “While equity release is not suitable for everyone, the majority of customers say it has made a substantial difference to their quality of life.
“Having launched version 10 of our standards in March, we are committed to building on 30 years of standard-setting work, to ensure as many customers as possible are well served by products which offer the strongest protections of any later life property loan.”
Wilson said the review was “not all damning and negative” as it put an emphasis on the vulnerability of potential applicants.
He said: “You could take the viewpoint that anyone needing to borrow in later life comes with a degree of vulnerability simply by being financially compromised.”
Of the 45 participants, 13 were said to have limited incomes of up to £20,000 a year while all except one had incomes between £20,000 to £50,000. The income of one participant who chose a retirement interest-only (RIO) product and described it as a “bad decision” was not recorded.
Wilson said: “For me, this is not a typical equity release client, and represents only a very small number of the cases I advise on.
“Far more are borrowing for other reasons other than supporting income: home purchase is my biggest reason for taking out a plan at the moment, followed by the more common home improvements, gifts and paying off existing mortgages.”
Gething said the report highlighted important issues for the market and how it implements strategies for vulnerable customers.
MorganAsh developed an online vulnerability assessment tool to help firms comply with Financial Conduct Authority (FCA) regulations.
Gething said: “It is important to understand the consumer’s characteristics and vulnerabilities at the point of sale, to ensure that best advice is given, and the transaction is appropriate. This raises a need for a systematic way to screen all applicants for products, as part of the advice process.
“Many in the industry are only looking at vulnerability when it is highlighted to them, from existing customers, whereas every customer really needs to be screened in this way and right at the start of the process.”
A fresh perspective
Will Hale, CEO of Key Later Life Finance, said fresh research which helped to build broader understanding of the market was “always welcome”.
Hale said Key already focused on making sure products were suitable for borrowers and said the group was “particularly mindful” of achieving good outcomes for those who are vulnerable.
He added: “All our customer facing staff are trained to identify customers who may be vulnerable and empowered to put in place bespoke engagement approaches where required – including using our team of Vulnerability Champions to offer specialist guidance.
“Our advisers are highly qualified experts in this sector and if equity release is not right for a particular customer, we will tell them.”
A thorough approach
Some respondents in the study indicated that they were made to feel as though equity release was the only or better option.
Wilson said advisers were always required to consider alternatives such as a RIO, but said the affordability assessment often “killed enquiries dead in the water”.
Wilson said he began all advice processes with a Zoom call then followed up with a detailed email regarding the client’s options as well as an equity release guide from Money Helper.
After this, the customer’s suitability is reviewed while reasons for the dismissal of alternatives are recorded and explained.
Wilson said he felt his reports were plain and understandable but acknowledged misunderstandings could still happen. To get around this, he attaches a questionnaire to each report which clients must complete before an application asking if they understand the costs, potential debt and risks.
He said: “This forces them to at least read the relevant sections of the report to get the information and then articulate their responses.”
Wilson condemned the practice of “hard selling” and said waiting for clients to be fully ready for equity release was always better.
The study found the timeframe between first enquiry and equity release sale for many borrowers was two to three months. Wilson said he had clients who waited as long as five years to complete.
“There are many possible good outcomes, which the report details, but I would stress better provision of realistic drawdown reserves, proper exploration of alternatives, and challenging client assumptions. Then later, staying in touch with clients and reviewing the advice at regular intervals,” he added.
Equity release borrowers lack understanding and feel pressured to buy – report
A qualitative research paper by The Financial Services Consumer Panel (the panel) of 45 participants examined the process leading up to the sale of an equity release product and the feelings thereafter.
Of the respondents, 26 took out equity release while two opted for a retirement interest-only (RIO) mortgage. A further 13 participants were family members who were closely involved in the sale process either during or afterwards and of these, 11 opted for equity release while two chose a RIO. Four considered a mix of later life lending options.
For participants, equity release was seen as the only or preferred option either because it felt right, downsizing was seen as “unappealing”, or they did not see banks as an option due to their age.
Others momentarily considered borrowing from family or friends, some did not want to rent a room out. Some overlooked the idea of a loan or remortgage for fear they would either not meet criteria or did not want to make monthly payments while retired or on a low income.
This was found to have shaped their decision even before speaking to a professional.
Participants were found to have varying degrees of equity release knowledge prior to taking it out.
This was either informally through Citizen’s Advice Bureau or a bank adviser, while others sought professional advice from independent financial advisers (IFAs). Those who went to an IFA tended to already be strongly considering equity release.
It was found that although alternative finance was discussed with a professional, this was often to discourage the option and push for equity release instead.
Online forms were primarily used to begin the equity release sale process and some participants consulted family before taking the product. Others chose not to as they did not want to reveal any financial struggles.
According to the study, the decision-making process was quick, with many taking equity release two to three months after initially enquiring. Some took up to two years where the buyer was uncertain or the financial need was less urgent.
Those who did not take out an equity release product ended up using alternative financial options such as savings, selling assets or just going without. They said they realised the potential downsides of equity release but would not write it off in the future.
Understanding the product
Participants did not seem to fully understand all the details of equity release at the point of purchase, though many had the understanding that the value of the home would go to the provider and their inheritance would be reduced once they died.
They understood that if they did not make monthly payments, the interest would be compounded but the report said this was “not always fully appreciated”.
Different product features were harder for some to understand. For example, the difference between a drawdown and a lump sum or restrictions around terminating a product.
Participants said both overt and covert techniques were used to guide decisions, with some saying they felt pressured to take out equity release or pushed to borrow more than they originally intended.
Some reported they were unaware of their product’s interest rate or were unable to find paperwork after taking out equity release.
Most participants went to an agent for an equity release specialist company over an IFA as they believed the latter would be more costly.
Those who did go to an IFA tended to already have access to one as they were wealthier, or they knew of one through their social circle. For those who did go to an IFA, some reported not realising when discussions on equity release became formal and or when they were informal.
As some had already decided on equity release by the time they spoke to a financial expert, conversations tended to be to reassure them of their choice or to seek the best deal.
The report said: “It appears that overall, consumers believed they received comprehensive advice when taking out equity release. However, the process of taking expert independent advice was often flawed, for several reasons.
“Examples included the consumer not fully engaging with the advice, not fully understanding the intricacies of equity release, not fully trusting experts to act in their best interest or finding the paperwork hard to digest.”
Participants reported limited contact from providers, agents and advisers after an equity release purchase with the exception being an annual statement or marketing to encourage a further drawdown or additional products.
Most participants said a review every one to five years would be appropriate, but concerns were raised around potential costs.
Just one respondent proactively reviewed their equity release product after purchase.
Although the majority stuck with their choice, the few who thought about changing or cancelling the product felt it would be easy to do so, just expensive. Others felt they were unable to change the terms once signing.
Some suggested the use of a portal like an app or helpline to monitor the product and accrued interest.
Overall, the report said participants had mixed feelings about their equity release product.
It added: “For those who considered the product to be a bad solution, there was consternation about their swiftly disappearing inheritance and their culpability in the decision making.
“For those who considered the product to be a good solution, some still felt residual discomfort with their product.”
In terms of financial and emotional outcomes, participants reported both positive and negative feelings.
The panel put feelings of emotional harm reported into four categories: a sense of personal loss; a feeling of guilt; feeling financially ‘stupid’, inadequate and naïve, leading to embarrassment; and anxiety from a dawning realisation of the long-term financial impact.
Factors such as feeling vulnerable to pressure, being single-minded or having less time to decide led to feelings of emotional harm.
Advice in hindsight
In hindsight, participants said they would like the option to review alternatives before committing to equity release. They also advised doing thorough research beforehand, discussing with family, speaking to an IFA about equity release implications or taking the product out later in life.
The report said: “Overall, many participants stated that they had not considered the full ramifications of taking out equity release.
“Most notably, these related to restrictions pertaining to further property purchases, as well as repayments in terms of charges and fees, including those for further drawdown. They noted that the language used by advisers, or found in associated literature, could be challenging to comprehend and contain jargon which they did not readily understand.”
Some said their experience could be bettered with more guidance including face-to-face meetings and more opportunities to ask questions.
It was also suggested that more information could be given on how to choose qualified independent advisers and ways advisers could highlight alternatives to equity release. Participants also said there could be more safeguards for vulnerable customers and a nomination of who should receive documentation before and after a sale.
A widely available factsheet on equity release was also proposed by participants, as well as several reviews before and after a sale.
Equity release and development prime areas for diversifying brokers ‒ analysis
Brokers told Mortgage Solutions that looking beyond the mainstream residential and buy-to-let markets makes sense, particularly given the potential market difficulties ahead, but suggested that this can be harder than it looks.
Just this week Coreco announced that it was setting its sights on commercial, new build and equity release as part of its own diversification strategy.
But what other areas are brokers looking into? And how important are partnerships for diversifying intermediaries?
Developers need help
James McGregor, director of Mesa Financial, said his firm is always looking for new areas where it can diversify to add value to its client base. He explained: “As a business our whole model was built around servicing our clients financial positions as opposed to focusing on the products.”
As a result, Mesa currently has two big areas of focus for diversifying its business, starting with development.
McGregor added: “The development space is one we have always had a hand in, but believe there is huge growth to be had for advisory firms within this space. As the landscape becomes a lot tighter for developers, with the cost of materials and the cost of lending increasing, and contractors looking more vulnerable by the day, developers will soon need advice navigating the lending market a lot more than they previously did.”
Branching out makes sense
Aaron Strutt, product and communications director at Trinity Financial, noted that in recent years his firm has helped arrange commercial mortgages and bridging loans alongside regular residential and buy-to-let mortgage business.
He continued: “Commercial mortgages can be pretty specialist, so we’ve worked with Connect for Intermediaries and The Loan Partnership to ensure our clients get the best possible deal.
“We could quite easily be entering a tricky period for the mortgage market, so branching out to try and get more business seems sensible.
“More of our brokers are keen to register and arrange equity release to tap into the older borrower market.”
Specialist help needed for struggling borrowers
Samantha Bickford, mortgage and equity release specialist at Clarity Wealth Management, said that one area she’s keen to do more with is adverse and sub-prime mortgages, off the back of the ongoing cost of living crisis.
She explained: “It may well be that we see more missed payments and defaults on credit agreements in 2021 through to 2022, with consumers borrowing more to keep up with their rising costs of living. Specialist advice from a qualified whole of market mortgage broker will be vital in these situations to ensure that they can access the most suitable mortgage options.”
Bickford added that this situation would also impact later life borrowers, which “spurred me to spread the word on how releasing equity from their homes can potentially be the answer to a more comfortable retirement”.
Get up to speed with equity release
This was echoed by Dominik Lipnicki, director at Your Mortgage Decisions, said that diversification is important for brokers, noting that his firm looks at assess client’s financial circumstances across the board “which means that advice and referrals are in their best interests in areas such as estate planning, life and health insurances and financial planning.”
He added that brokers who are not qualified in equity release should still look into the sector, or at least work with a referral partner for those instances where a client over 55 might benefit from releasing equity in their home.
“In our aging population and with the cost of living crisis biting, all mortgage advisers should understand how equity release works,” he concluded.
The right skillset
Protection is also a focus for McGregor, who explains the priority has been building out the correct in-house expertise .
He said: “It is rare you come across advisers that have a full skillset in advising on a client’s full protection needs. With the right people in house this can be a huge growth area.”
How to get diversification right
So what do brokers need to bear in mind if they are looking to branch out into new areas of the market?
For McGregor, it’s crucial to first partner with firms that are experts in the field before venturing into that market yourself. He added: “This can be a huge knowledge bank; you can then decide how this can then transfer into your own business.”
Bickford adds that passion is crucial. “Simply offering a transactional service, because it is popular, won’t work. You need to enjoy the topic and feel passionate about making a change, or helping clients in that particular area.”
However, it’s also important that brokers are aware of their own limits. Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, notes that standard residential is now a very complex business, with more and more cases having complicated features, which makes it important for brokers not to spread themselves too thinly.
She added: “I tend to outsource anything too specialist ‒ such as bridging ‒ as you cannot be good at everything.”
Coreco sets sights on commercial, new build and equity release ‒ Montlake
Coreco was founded in 2009 with 10 employees. The firm now employs 65 and has opened a Southend office to house its customer services team.
Montlake (pictured) said the firm has pivoted over the last three years to become a “national broker”. This has involved talking to different introducers and recruiting “incredibly talented people and newcomers” outside of London.
Montlake acknowledged that the pandemic had changed mindsets around remote working, noting that the company has a protection-only broker in Wakefield, and an administrator in Scotland who is training up to be an adviser.
He said the company’s recruitment focus was on servicing lead flow, finding the right people who fit and add to the culture, and an increasing focus on hiring protection specialists.
He added that protection was an “area where we have failed at for several years” for the firm, but following a cultural shift, now viewed itself as a “mortgage and protection broker”.
Montlake said that Coreco now has two protection-only brokers to complement its six mortgage and protection brokers.
Commercial, new build and equity release areas of interest
Coreco’s areas of interest in the near-term include new build and commercial mortgages, as well as opening more franchises nationally.
Montlake said commercial was a “great market” and an area “where brokers can excel in” as it was a “grey area”, adding that its commercial department, under Julian Ingall, has been “very successful”. But now is the time to “grow the business” and seize opportunities with small housebuilders and property developers.
Montlake believes that new build is an increasingly important and growing sector of the market as more homes are needed.
The firm has therefore hired new build expert Matt Thorn to grow the team and business further in that direction.
He added that Coreco would consider entering equity release advice in the near future, but it still needs the “right people”.
“We want to be that one-stop shop for people for a life and nurture those clients and empower them to make better financial decisions. That’s our motto,” he said.
Work with more partners and expand the network
Montlake said that Coreco’s priorities include developing introducers, working with more estate agents, increasing corporate partners and continuing to promote its website, social media activity, and brand awareness.
This includes expanding its Southend operation and adding telephony brokers.
He added that its purchase of Mortgages Online will be leveraged as a lead generation tool so it can better compete with digital mortgage brokers.
Network growth is also on the cards, with Montlake hinting at hopes to open an office in Scotland in the near future.
Coreco is working with two network partners, who are both looking to grow, and is “in conversation” with several more.
The firm is also developing a retirement plan for brokers who may want to pass on their client bank and earn as an introducer.
‘People powered by technology’
A point of frustration for Montlake is when people or firms would enter the mortgage market and say it’s “broken” and they were going to “fix” it.
“They’re talking nonsense. This industry is not broken. Yes, we can do things better, but we are one of the most well-run, well-regulated, consumer centric industries,” he said.
Montlake believes that as the technology in the mortgage sector improves, it will always remain “people powered by technology, not technology powered by people”. He cited companies like Habito and Trussle that he said had assumed they could disintermediate the mortgage market, only to find that’s not what customers wanted.
He said that these firms have since pivoted and decided to “put people front and center”, but that their efforts have boosted the intermediary services’ public presence for everyone.
“Although some people love to hate them, what they’ve done is made us look at ourselves and think about how we deal with our customers, how we use technology, and how the customer journey works. They’ve advertised so more people are more aware of what a mortgage broker is,” he said.
Key industry challenges
Montlake said that customers will now compare mortgage brokers to their last interaction with a company, so comparisons with Amazon, for example, will become the “standard”.
He noted that brokers who utilized technology to “enhance” the customer journey would be best-placed to succeed, and doesn’t think “old-fashioned sales operations will survive if they don’t adapt”.
Another big challenge for the industry is diversity and inclusion, which Montlake has put a lot of work in to in his role as chairman of the Association of Mortgage Intermediaries (AMI). He said particular focus needed to be paid to recruitment, retention and promotion.
“I think that’s imperative. It’s not just a moral obligation, but there’s a clear, proven business rationale for it.”
Montlake said that “diversity of thought” would only make a business better and customers will increasingly want to see themselves in the companies they interacted with.
The governments green agenda also presents a lot of uncertainty, according to Montlake, particularly with the practicality of getting all properties up to the required Energy Performance Certificate rating in time for the proposed, yet unconfirmed, deadlines. He expressed additional concern over how the mortgage industry could encourage landlords to make the required changes in time.
Montlake continued that recent papers and proposed changes from the Financial Conduct Authority (FCA) were not “as well thought out as they should be.
“They could spend more time policing the bad people than just creating more work for the good people. The bad people are always going to do it, so I think that it’s just increasing regulation for regulation’s sake and increasing costs eventually get passed on to the consumer – that doesn’t help anyone.”
He added that there were “excellent people” at the regulator, and he had been “encouraged” by its engagement. However, he said more collaboration between brokers, lenders, trade bodies and regulators would be needed to yield the best customer outcomes.
“We’re a fantastic industry. In fact, in many ways, we’re a leading industry. I want everyone to know that, and I want more voices, especially more female and diverse voices, and a lot more competition.
“I look around at some of the new companies and leaders and I am excited about where they will take the mortgage industry,” he said.