The £150,000 loan, introduced by brokers Alexander Hall, was needed to replace a previously agreed buy-to-let offer for a customer on which the valuation had expired.  

There were no other lending options for the client that would be able to go ahead without a physical instruction and with the seller wanting to complete the sale, UTB enabled the purchase by providing a bridging loan. 

The bridging loan was offered to the purchaser’s wife, secured on her home, and these funds enabled the buyer to complete the purchase.  

Six working days passed between UTB issuing a decision in principle and the customer receiving the loan. JMW Solicitors LLP, representing both UTB and the borrower, oversaw the case. 

Mike Walters (pictured), sales director – property intermediaries at United Trust Bank, said: “This is a fantastic example of all parties pulling together to ensure the customer could complete his buy to let purchase.  

“Peter Corbett at Alexander Hall did a great job helping his client to secure the funding he needed by thinking outside the box and guiding his client to consider bridging as a quick and viable solution to his problem.” 

“Although the Covid-19 lockdown is presenting additional challenges to lenders, brokers and lawyers, the investment made by UTB in Fintech and other service enhancements over the last 18 months is helping us to overcome barriers to lending and enabling us to continue supporting brokers and their customers,” Walters added. 

Greg Cunnington, director of lender relationships and new homes at Alexander Hall said: “Even in these challenging times, intermediaries and lenders can work together to find great solutions for clients and act quickly.  

“This case with UTB has highlighted how important it is to be working with proactive lenders who have the systems, flexibility and desire to lend.” 

Brokers anticipate a cut will intensify what is an already fiercely competitive marketplace.

Competition could take the form of deeper rate cuts on mortgage repayments. And brokers expect this will lead to a richer choice of product offerings and better service from lenders.

“What can happen is clients see there’s a drop in rates by 25 basis points and automatically presume fixed rates will reduce by that much. The reality is that doesn’t happen,” says Adrian Anderson, director at Anderson Harris.

“But the market has been so competitive that it wouldn’t surprise me if some of the prime rates were to reduce,” Anderson said.

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, adds: “Mortgage rates look like they’ll remain low for the whole of 2020.”

Top six dominate

Brokers agreed that a low-rate scenario would see the big six lenders continue to dominate, particularly in high-volume business. Meanwhile, mid-size and smaller players could be pushed toward riskier deals.

“If you look at the top of the tables now, you will start to see the big banks beginning to dominate. That’s become the case more recently because they have access to funds and appetite to lend,” says David Hollingworth, associate director, communications at London & Country Mortgages.

“There’s so much competition, someone will move. The big banks may feel the impact less than others in the market and may be tempted to cut a little more than some would like,” he continued.

“It forces other lenders to look higher up the loan-to-value (LTV) scale. Over time that starts to bring down rates for those borrowers as well and you’ll see more spread from lenders in what they’ll target.

“For the mid-size mutuals, very definitely there are difficult decisions around margin,” Hollingworth adds.

Manual underwriters a must

If the base rate does shift, brokers anticipate a slew of new products and criteria this year.

“It could be an interesting market where the top six innovate and introduce new really good criteria points,” notes Alexander Hall’s Cunnington.

Mid-size and smaller lenders particularly would need to devise new ways of attracting business.

“As we saw with Tesco and Sainsbury’s leaving the market last year, it’s very difficult for any lender to compete with the big six when it comes to rate competition because the margin’s just not there,” Cunnington continues.

“They’ll have to look for other areas of the market they’re comfortable going into and that’s something we could see in the coming weeks.”

The area of focus could include new builds, manual underwriting and interest-only.

“Manual underwriting is a big one,” Cunnington says.

“There are a lot of very high quality customers out there who don’t quite tick those boxes but are a really good opportunity for lenders if they just have a facility in place for the intermediary to speak to them and talk through the case on a one-on-one basis.

“That’s an area we’ve seen the market massively improve on with some of those lenders. And obviously it means there is an opportunity to make a little bit of margin there, because you can have your rates a little bit higher if you’re offering lending that nobody else can offer,” he adds.

Lender and broker cooperation

Manual underwriting goes hand-in-hand with lenders sense-testing new ideas with brokers before bringing them to market.

Cunnington explains the firm is seeing lenders approach intermediaries like it before they go to market.

“They’re saying: ‘These are the ideas we have. Is this backed up by what you’re seeing? Would we get any volume on it? Is it worthwhile? How would you shape it?’,” he says.

“When they do that you get something that works for everyone. It’s gone wrong in the past when lenders have brought things to market they’ve only discussed internally. We’re finding now that they meet at a more embryonic stage, which is great because things are coming to market that everybody wants.”

Conversations such as these have led to moves up the LTV scale, top-slicing on buy-to-let and changes to LTVs on interest-only products.

“Santander last year went to 85 per cent on a part-and-part basis, which has proved very popular; other lenders may look to copy that,” Cunnington continues.

“The lender security is still there because you can still cap at 50 per cent interest-only, but the initial down payment for the client is lower. It helps the purchase market because not everybody has a 25 per cent deposit.”

Survival of the biggest

Getting creative with criteria could be the best defence against further casualties in the market if rates do go lower. 

“Unless the lenders are doing a good amount of volume, or have something striking about their criteria, I wouldn’t be surprised if a few were to drop by the wayside. The margins are so thin and there’s so much competition,” says Anderson, noting that “it might be the smaller banks.”

“We were excited when Tesco and Sainsbury’s launched, about how they would be a bit different and of course they are names people are aware of and comfortable with, outside of finance.

“But if you look at the brutal reality of why they’ve left the market it’s because it’s so competitive and they can’t keep up,” Anderson concludes. 

A new survey of would-be first-time buyers by Santander suggests that deposits are one area where buyers suffer under certain misconceptions.

The lender found that two-fifths had not saved a penny towards a deposit, with the average at around £8,300. When asked what they were targeting as a total saving for a deposit, responses came to an average of £24,816.

Yet figures from the Office for National Statistics found that the average deposit put down by those purchasing their first property in March was much higher at £44,000.

Miguel Sard, managing director of Santander Mortgages, suggested that the “dream” of home ownership was looking increasingly out of reach for the next generation of first-time buyers.

Innovative lenders opening up more small deposit options

Greg Cunnington, director of new lender relationships and new homes at Alexander Hall, said that his firm regularly deals with first-time buyers who are unclear about their deposit options, noting that while developers and the Help to Buy scheme had invested a lot of time into promoting the message that home ownership is possible with a five per cent deposit, some clients still feel you need 10 per cent or even 15 per cent deposit.

He added that over the last 12 months lenders have been particularly innovative in helping borrowers with small deposits, such as by offering increased loan amounts or introducing more inter-generational lending options.

“The more innovation here the better, as if we can combine this with increased client awareness of the options it is better outcomes for all,” he continued.

Understanding all of the costs

Carmen Green, mortgage adviser at Xpress Mortgages, said that she felt the main part of her job was to educate clients, particularly first-time buyers who may have misconceptions about how the process works “usually fed to them by their parents who took their mortgage out a long time ago when the mortgage market was very different”.

She said this will not only mean taking the borrower through the basics of how the process works, but also highlighting the associated costs that come with a purchase, from the stamp duty and survey fees to solicitor costs.

Green added that “many first time buyers are unaware of what and how much the associated costs are”, so this forces them to address whether they really are ready to take on such a large commitment.

She continued: “Some clients know about stamp duty but haven’t a clue how much it is and/or don’t know that there is the stamp duty allowance up to £300,000 now for first-time buyers which can come as a nice surprise.  Many clients don’t know if a solicitor is going to cost them £200 or £1,000, so they often ask for some quotes or an expectation of all other associated costs.”

Broker’s educational role 

Cunnington noted that there are other common misconceptions among first-time buyers, such as the idea that you need several years in order to build a good credit score or that self-employed clients will have issues obtaining a loan even if they have a strong income.

He added: “These are scenarios where it is good for a mortgage intermediary to speak to first-time buyers at the early stages of the process, so that we can guide them through.”

A question of commitment

Andy Wilson, founder of Andy Wilson Financial Services, said that his firm never hears from first-time buyers who don’t think they need a deposit, suggesting the message that 100 per cent mortgages are long gone has clearly got through to them.

He continued: “ If we see the clients before they are exposed to misleading online forums or other misguided information, we can educate them as to the need for a deposit and why it is necessary, and how much things are improved cost-wise if they get a larger deposit. We can also ensure they understand the other costs of buying a house.”

Wilson added that he is seeing a “fair amount” of first-time buyers where the parents are providing the bulk of the deposit, and admitted he sometimes questions how committed those buyers will be with their new mortgage and home running costs, having not saved anything towards the purchase themselves.

“The biggest threat for me is the customer,” said Jeremy Duncombe, director of intermediary distribution at Accord Mortgages.

“It’s what the customers decide they want to do going forward. Neither the broker nor the lender own the customer. Changing behaviour is the biggest threat I can think of. That customer is going to head off down a route which may not be the best for them, but they feel they can get theoretical advice on the internet or price comparison websites and bypass the advice route, ” said Duncombe.

“That’s the biggest danger, that customers feel they are getting something they are not.”

Chair, Victoria Hartley said keeping the profile and benefit of advice high in the consumer’s mind is more important than ever right now.

Greg Cunnington, director of lender relationships and and new homes at Alexander Hall added that the key right now is partnerships and collaboration between brokers, lenders and technology servicers adding if we get it right, I don’t think any threat will be a problem.

He continued: “I am not just saying this because Jeremy’s here, but Accord are one of the greatest examples of a lender that is beginning to really partner with their brokers – and what we’re seeing as a result is a much better client outcome. If that continues, we’ll be fine. If it doesn’t, the clients will show us.”

To watch the video in full, [05:02] see below.

Our panel includes (from screen left)

Victoria Hartley, group editor, Mortgage Solutions (host)

Jeremy Duncombe, director of intermediary distribution, Accord Group

Jane Benjamin, director, mortgages, Sesame Bankhall Group

Greg Cunnington, director of lender relationships and new homes, Alexander Hall

Jeremy Duncombe, director of intermediary distribution at Accord Mortgages, said 3,800 brokers had signed up to the mutual’s educational, broker-focused Growth Series by April this year and the feedback  has been overwhelmingly positive.

The series covers a raft of key issues including lead generation, best use of public relations, using Linkedin effectively and other social media and offers a range of mediums from video to podcasts and handy guides.

Jane Benjamin, director, mortgages at Sesame Bankhall Group said: “This is not a product push from Accord, it’s a training and development opportunity exploring ways we can all work together.”

She added: “Embrace the opportunities in the market. Have a look at your whole business strategy and business plan and where you add value for your customers and make sure your customers know you are a gold star broker.”

Watch the video below [04:57] for the full debate from our expert panelists:

[From left of screen]

Victoria Hartley, group editor, Mortgage Solutions (chair)

Jeremy Duncombe, director of intermediary distribution, Accord Mortgages

Jane Benjamin, director, mortgages, Sesame Bankhall Group

Greg Cunnington, director of lender relationships and new homes, Alexander Hall

This week Kensington Mortgages launched a new range of ‘Hero Mortgages’, aimed at people working in “essential public sector services” such as firefighters, NHS staff and teachers.

The deals are available at up to five times income, and at a 55 per cent debt-to-income ratio.

Mark Arnold, chief executive officer at Kensington Mortgages, said the firm had used its data analytics to study the career trajectories of people working in these jobs to better understand their earnings level and job security.

He added: “By doing so, we have identified a new way of helping the UK’s heroes by creating specialised lending criteria. Launching this innovative product highlights our commitment to helping the heroes in our everyday lives buy their own home.”

Addressing an underserved market

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, said that any innovation from lenders which meant they could increase loan to income ratios was a positve, noting there was no doubt there is client demand.

He added: “The new Kensington hero products show some really good innovation for an employment sector that is relatively under-served by lenders in terms of specific assistance such as this.

“From a risk perspective the job security of these professions is relatively stable, so you can see the attraction is also there from a lender’s risk perspective.”

He noted this was a similar attraction for lenders who offer dedicated ‘professional’ mortgages such as Clydesdale and Metro Bank as these borrowers also have a “clear pathway” for future earnings.

“As these clients know their income will increase in the medium term they often have an appetite to borrow as much as possible, so these options definitely serve the market place well,” he added.

A marketing exercise

Andy Wilson, founder of Andy Wilson Financial Services, suggested that as public sector workers may be deemed to have “safer” employment chances, it meant Kensington would feel happier loosening income restrictions.

But he warned that calling the deals ‘Hero Mortgages’ was purely a marketing exercise, riding on the back of public support for the those working in the public sector.

He continued: “While many of these workers undoubtedly do jobs a lot of us would find very challenging, they are not really any safer as mortgage borrowers than any civil servant.”

Wilson also cautioned that if these workers are not being paid enough, the answer is not to allow them to borrow more than normal.

“Their career progressions are not generally as rapid as might be seen with newly qualified ‘professionals’ such as lawyers, accountants and doctors. Here, the career progression can be rapid and pay rises move upwards just as quickly,” he added.

Is it a gimmick?

Stuart Powell, managing director of Ocean Mortgages, noted that he had used Scottish Widows’s professional mortgage range in the past, but said the rate and fees are “rarely any different to the rates offered to non-professionals”.

He suggested that while the Kensington deals seem a bit gimmicky, they will likely “catch the eye” of some people working in those professions.

“If you look at the detail of the offers, neither the rate or income multiples are market leading. These deals should be considered by a broker as part of their research if their clients are eligible.

“A good whole of market broker would do that as a matter of course,” he added.

Speaking on Mortgage Solutions Television in association with Accord Mortgages, Benjamin (pictured) asked: “With all the different ways to engage with your customer, how do you add value to your customer and ensure your customer knows you are a gold star broker?”

She also gave some of her key tips to help advisers stay on the top of their game with a flourishing business.

“Have a look at your whole business. Do you understand all the market segments?” she continued.

“If not there’s so much training opportunity and development support available from lender partners.”

And she urged brokers to check if their business was future-proof for the next decade.

The video panelists from screen left to screen right are:

Victoria Hartley, group editor, Mortgage Solutions

Jeremy Duncombe, director of intermediary distribution, Accord Mortgages

Jane Benjamin, director, mortgages, Sesame Bankhall Group

Greg Cunnington, director of lender relationships and new homes at Alexander Hall

In part four of our video series in association with Accord Mortgages, Duncombe said: “If these changes are not addressed by the industry, the customer is going to head off down a route that may not be the best for them, especially if they feel they can get theoretical advice on the internet bypassing the actual advice route.”

He added: “That’s the big danger. That consumers think they are getting something they are not. It’s for lenders and brokers as well to make sure their consumer education carries on right through the mortgage process.”

During the debate hosted by Victoria Hartley, group editor of Mortgage Solutions, Jane Benjamin, director, mortgages at Sesame Bankhall Group said there was no doubt technology would drive direct business.

She added: “But there are more and more customers who will need support in different segments of the market. Brokers are the biggest threat to themselves if they don’t address these challenges,” she added.

“Does the customer know who you are? Does the customer know where to find you?”

Click on the screen below for more of the debate [05:02]

Panelists (left of screen to right)

Victoria Hartley, group editor, Mortgage Solutions

Jeremy Duncombe, director of intermediary distribution, Accord Mortgages

Jane Benjamin, director, mortgages, Sesame Bankhall Group

Greg Cunnington, director of lender relationships and new homes at Alexander Hall

The Help to Buy scheme has become a dominant force when it comes to purchasing new homes according to new research from modular housebuilder Project Etopia.

It found that in Northampton last year a massive 97 per cent of new build sales went through thanks to the Help to Buy: equity loan scheme, with areas like Burnley, Derby and Warrington also seeing the scheme account for a large percentage of new build transactions.

But it warned that there is a danger that when the scheme ends “the rug could be pulled out from beneath those areas that have to rely on Help to Buy”.

It follows data from the government last month that one thousand homes a week were purchased using the scheme in 2018, up by 12 per cent from the previous year.

Always discuss alternatives

Stuart Powell, managing director of Ocean Mortgages, said that he has always been cautious about the scheme as there are so many unknowns, such as what the rent will be after the initial period finishes and whether there will be a variety of deals available for the borrower once their first deal comes to an end.

He continued: “When speaking to first-time buyers, I will always discuss alternatives to Help to Buy in a similar way to I discuss alternatives to equity release with older clients. For example there are good 95% mortgage deals on the market, and parental contributions could be a better way to enter the property market than Help to Buy.”

TMA Club has called on brokers to be proactive in contacting their existing clients that are already on Help to Buy deals to discuss alternatives ahead of them starting to have to pay back the equity loan.

Rob McCoy, senior product and business manager at TMA, said that while the scheme has “undoubtedly been instrumental” in helping people get onto the housing ladder, the need to start repaying the equity loan after the initial five-year period is a “detail often overlooked” by borrowers.

He added: “Uncertainty on next steps needn’t be a problem – there are plenty of avenues that borrowers can take to secure the best deal with this accumulation of interest. It’s in an adviser’s best interest to ensure their clients are well-advised to take the best possible route for them and their circumstances.”

Intermediaries add real value to Help to Buy deals

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, noted that Help to Buy had been a “strong growth area of purchase business”, as has new build in general, pointing out that it has been a real boost for those buyers who are unable to rely on the bank of mum and dad.

Cunnington also emphasised that intermediaries can add huge value to a borrower tempted by Help to Buy, highlighting that around 90 per cent of all Help to Buy deals to date have gone through via a broker.

He explained: “Clients will often know the basics but will not have an understanding of the detail on the scheme itself, or that there is both a mortgage and a Help to Buy application process involved. An intermediary can add real value to these clients by offering thorough advice on all elements of the Help to Buy scheme and process.

“This should also include how to staircase or how to remortgage away from the scheme when possible and what happens when the interest free period ends.”

Too reliant

Powell warned that while independent advisers could give borrowers a full run through of their options, this may not be the case for all buyers.

He said: “Is a first-time buyer who visits a new development, and visits their tied mortgage adviser, informed about all the alternative mortgage options available to them?”

“Help to Buy has provided an alternative for first-time buyers and undoubtedly helped the property market but some house builders appear to have become too reliant on it,” he concluded.

In the next chapter in our video series, in association with Accord Mortgages, Duncombe says mortgage leneder Accord has coined the phrase ‘What can you do that a robot can’t?’ in its growth series adding ‘for me it’s the soft facts.’

“Technology can be harnessed to to add value for the customer in the advice process,” he adds.

Mortgage club PMS and network Sesame have invested £5m so far to support their almost 10,000 mortgage brokers, said Jane Benjamin, director, mortgages at Sesame Bankhall Group.

She noted that the question for advisers will be: “Does your customer know where you fit? Where are you for the customer in the mortgage journey?”

“You need to make sure you are relevant.”

The video panelists from screen left to screen right are:

Victoria Hartley, group editor, Mortgage Solutions

Jeremy Duncombe, director of intermediary distribution, Accord Mortgages

Jane Benjamin, director, mortgages, Sesame Bankhall Group

Greg Cunnington, director of lender relationships and new homes at Alexander Hall

Watch parts one and two of the video series debating the Mortgages Market Study and product transfers.