Transactions above pre-pandemic levels despite Feb drop ‒ HMRC
The latest transactions figures show that the provisional, non-seasonally adjusted estimate of residential transactions for February came to 96,250. While this is up by 15.3 per cent from the previous month, it is nonetheless down by 20.6 per cent on the same point last year.
HMRC warned that this drop should be “treated with caution” given the activity levels seen last year, as buyers looked to take advantage of the stamp duty holiday. Looking at figures for February over the last decade, the estimate for 2022 remains notably higher than typical activity levels for residential purchases.
On the non-residential front, the non-seasonally adjusted estimate for February is 9,860, up by 17.4 per cent on January and 10.2 per cent on February 2021. HMRC noted this was the busiest February for non-residential deals since 2017.
Buyers faced with fewer options
Clare Beardmore, head of broker and propositions at Legal & General Mortgage Club, noted that the “scarcity of supply” has unsurprisingly dented transaction levels compared to last year, but argued there are still plenty of buyers determined to press ahead with purchases.
She added: “As the market settles into a new rhythm and we head towards another busy spring, the next few months could prove more complicated for borrowers. Household budgets are under significant strain, and the cost of living crisis is primed to deepen in April, with energy costs and national insurance contributions set to mount.
“Against that backdrop, the value of advice remains paramount. Advisers are well-placed to help prospective borrowers navigate a knock to their finances, and source a deal that is well aligned with their individual circumstances.”
Soaring costs will put buyers off
Karen Noye, mortgage expert at Quilter, noted that while transactions were slowing, they remained “very high” compared to pre-pandemic levels, though warned this is likely to fall in the months ahead.
She explained: “The current fiscal position will mean many people feel the squeeze financially due to soaring inflation, Bank of England interest rate hikes and the rising cost of living. Prospective buyers will likely be put off and buying a new home will be pushed out of reach for many, so the number of property transactions could well be driven down as a result.”
Rise in paying exit fees
Ross Boyd, founder of mortgage comparison platform Dashly.com, said that comparing this year’s figures with last February’s was “like comparing apples with pears” given the impact the stamp duty holiday had on the market.
However, he emphasised there was life in the market, suggesting that many borrowers were using the increased equity they now have in their properties in order to secure more competitive mortgage deals.
He added: “In a growing number of cases, they are even paying early redemption charges to lock in now while rates are low as it can save them money.”
Growth in flexible working boosts prospects for women brokers ‒ analysis
To mark International Women’s Day, Mortgage Solutions has been speaking to female mortgage brokers about their experiences of the industry and what more can be done to make mortgage advice an attractive option for the next generation of women.
While brokers generally suggested that the industry has improved in terms of how women are treated over recent years, it’s clear that there is still far more work to be done on boosting the support on offer to female advisers.
Why do men dominate senior roles?
Clare Beardmore, head of broker and propositions at Legal and General Mortgage Club, said there was a “real issue” of a gender split within the industry, with men dominating managerial positions, adding “we need to understand why this is before we can change it”.
She continued: “Society still often expects women to be the primary caregivers, and from personal experience I know how hard it is to balance one’s family with a stressful job. We need a conscious change of culture in the industry and a widespread determination and commitment towards driving gender equality.”
Flexibility of advice can help women
Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, emphasised that there are “great women at the top of their game” in the mortgage industry, and argued that those who have succeeded in the mortgage industry have done so purely on the basis of talent and hard work “rather than because a gender diversity box had to be ticked by an HR department somewhere”.
King pointed to the fact that mortgage advice is not necessarily a 9-5 job, which can allow advisers to fit their work schedule around children where necessary, adding that part-time work is also perfectly possible.
I couldn’t find a home
Rebecca Robertson, director of Evolution Financial Planning ‒ an all female advisory business ‒ said the challenges faced by women in the industry was a driver in her setting up the firm.
She explained: “I couldn’t find a home for myself, a firm that suited where I was at and how I wanted to do it. It’s about community and understanding each other. Sympathising with those issues and overcoming them together.”
However, in her experience only a small number of male colleagues were in a position and willing to “hold the door open for women” in terms of aiding career progression.
Despite this, she emphasised that mortgage advising can be an excellent career for women, as it “works around children brilliantly”.
The industry is changing
Karen Noye, mortgage expert at Quilter, said it was clear that since starting her career in 2003 there has been an increase in the number of women working within financial services, particularly in leadership roles.
She said: “I feel that having more women in leadership roles within financial services has helped encourage other women to join the industry. One area that has improved considerably is the ability to strike the right work-life balance, and I think the increase in female leadership in the industry has contributed to this as it has helped to shine a light on the needs of a family, for both men and women.”
Beardmore emphasised that there is cause for optimism, with a “clear generational trend” at play.
“My daughters have grown up in a world where it’s perfectly normal for women to play football or to study engineering and perhaps also importantly, so has my son. We need to ensure we embed this progress in every part of our industry.
“I’m hopeful that someday we will reach a point where we no longer really need an International Women’s Day – not because gender equality is no longer important, but because by that point it has simply become second nature.”
Starting a family
Siobhan Holbrook, owner and director at Mortgage Light, said the biggest challenge for women in the mortgage industry is taking a break to have a family.
She continued: “It’s really difficult to find the balance of having a career and raising children without feeling the mother’s guilt. The remortgaging side of the mortgage industry does offer the flexibility needed for women with children, as customers generally have a six month remortgage window to work with which takes away the tight time constraints.”
However, Holbrook warned that when it comes to property sales, brokers may have to deal with unrealistic timescales, which puts them under severe pressure.
She continued: “This is just not realistic for many women with children. With that in mind, it’s definitely a career better suited for those without children. I do think, however, that women and particularly mothers in many ways make the best mortgage advisers. Generally speaking, women are empathetic, lending to a natural passion for helping people.”
A level playing field?
Carmen Green, mortgage and protection adviser at Xpress Mortgages, noted that she has worked in all-female office for most of her career, and pointed out that she has always considered herself to be on a level playing field with others in the industry. She also noted that she has always felt supported by all co-workers, irrespective of gender.
She continued: “Perhaps that speaks for itself as a female professional born on the cusp of the millennial/Gen Z generation, climbing the ranks within a female-owned business in a predominantly male dominated industry. I was brought up to believe that I was capable of achieving anything if I had the skill, patience and mindset to achieve. Now I’m proving it.
“I expect there will be others in the same boat as me and I love to see it.”
Attracting more talent
King argued that the reputation and perception of the mortgage industry may work against it when it comes to attracting young women to a career in advice.
She explained: “I think that jobs in finance generally are not perceived as particularly glamorous by young girls and probably thought of as dry and dour, so I think anything that can be done to encourage women that this can be an interesting, challenging and satisfying career choice should be highlighted.”
Advising the next generation of advisers
King suggested it was important for any young women looking to start out as a mortgage adviser to initially work in a busy firm of brokers, so that they could gain experience and learn as much as possible from their more experienced colleagues.
She added: “After that try to maintain ownership of your client bank so as you grow your clients you can build a business that will provide you with ongoing opportunities into the future.”
Noye suggested that the progress in flexible working and hybrid advice offered real benefits to the prospects of women within mortgage advice. She explained: “Personally, having a family and being a mother to a daughter who has a medical condition, the changes in working practices and the ability to work flexibly has been a real lifeline. It has allowed me to get the balance between family and work life right.”
Noye added that the biggest key for women just starting out in the industry was securing the right level of support, noting that much of her own progress had been helped by managers as well as the training on offer within the workplace.
She continued: “Working as an adviser can feel isolating at times, more so with the increase of home working, so having help and support available in your early years – and actually making use of it – can make all the difference in terms of the longevity and success of your career.”
Pepper launches free energy-efficiency property check for landlords
The specialist lender said the initiative was aimed at helping customers make their homes more energy efficient. In addition to a free energy efficiency survey, and EPC certificate, customers will be offered a tailored action plan.
Proposed government rules require all rental properties to raise minimum energy efficiency standards from A to C within three years, up from a minimum of E now is a huge challenge for the industry.
Data suggests 60 per cent of the UK’s current housing stock is rated D or below and research estimates average upgrade costs range from £6,000 to £10,000.
The regulations are expected to be introduced for new tenancies first from 2025, followed by all tenancies from 2028.
Pepper Money said it could offer customers a second charge mortgage to finance any energy efficiency improvements recommended by the suggested plan. For any customers who undertake the suggested works, a second EPC can also be claimed to validate the improvements.
In January, Pepper Money improved its criteria to remove restrictions around properties with solar panels. Last year, launched a partnership with Ecologi which committed it to providing ongoing financial support for tree planting and carbon reduction activities.
Laurence Morey, (pictured) chief executive of Pepper Money, said: “At Pepper Money, we understand that we have an active role to play to change the way our industry is impacting our environment. We know this won’t happen overnight but will be the result of many consistent positive changes and helping our customers to better understand the impact they and their properties have on the environment.”
Danny Belton, head of lender relationships, at Legal and General Mortgage Club added: “This is a strong statement of intent by Pepper Money, which has recognised the size of the challenge currently facing the industry. By providing free EPCs and an option for customers to borrow to make improvements, this initiative is directly enabling positive outcomes. In the long term, this will mean that not only will more customers have an accurate picture of the current state of their property, but also that they will have access to the knowledge and resources they need to make their homes more environmentally efficient.”
Funding the cost
Pepper Money is the latest provider to join the raft of specialist lenders targeting this market to support landlords meet EPC requirements.
Sundeep Patel, director of sales at Together, also suggested some tips for landlords in this position and the brokers who may be advising them.
He said: “If your property is found to fall short of the required rating, you could face a fine of up to £30,000. Plus, you’ll have an unlettable property on your hands, which is not only a waste of essential residential resource, but also means you’ll incur a loss of rental income.”
Patel said regardless of whether there would be general upgrades or a larger scale of improvements, short-term funding like a bridging loan or a longer-term arrangement such as a second charge loan could prove a good choice.
Patel said: “Securing a bridging loan against your rental property, or another property in your portfolio, could allow you to make the investment necessary – if you’ll need less than 12 months to complete the required work. After you’ve made the improvements, and potentially increased the value of your property, you could refinance onto a new buy-to-let mortgage.”
He added for consumers with a great rate who do not want to refinance, a second charge loan could be more suitable.
“The second charge mortgage will run alongside, but independent of your current one – so if you want it to end sooner that your existing buy-to-let mortgage, it can. In fact, you can borrow over as little as four years.”
Tactics to prepare for the eco-changes include switching to LED lighting throughout the property, insulating walls and installing a new energy efficient boiler. Landlords can also replace old windows with double or triple glazing, install a smart meter and consider solar panels or ground source heating.
Affordability review: removing barriers or creating unintended consequences – Roberts
For buyers picking two or three-year fixed-rate mortgages, that means passing stringent stress testing rules set in the wake of the 2008 financial crisis.
Those rules could soon be changing, however. In December, the Bank of England announced its plans to launch a consultation this year on a recommendation to withdraw affordability testing.
It’s a measure that several organisations in the mortgage market have called for action on for some time now, but the news of the consultation has been met with both positive and less favourable responses from the industry. So, what impact could the Bank of England’s proposed changes really have for buyers?
Breaking down barriers
The proposals put forward by the Bank of England will almost certainly help some consumers, particularly first-time buyers.
It’s no secret that stress testing rules have prevented some consumers from stepping onto the ladder. Under the current regulations, buyers must be able to prove they can afford repayments at three per cent above their lender’s standard variable rate (SVR).
First-time buyers today could quite easily find a 90 per cent loan to value (LTV) mortgage with a rate below three per cent, perhaps even lower, but regulations mean they’ll be stress tested at between six and seven per cent.
The impact of the criteria at lower rates is even more pronounced. For a borrower hoping to secure a two per cent rate on their mortgage, stress testing at six per cent represents a more than 300 per cent uplift on the interest they would actually be expected to pay over the term of the mortgage.
That’s an arguably unrealistic hurdle to overcome, and one that can be particularly frustrating for first-time buyers who may already be paying more in rent than they would in mortgage repayments.
Providing more flexibility around loan to income (LTI) ratios could also be helpful for buyers, if done in the right way.
Larger lenders must currently ensure that no more than 15 per cent of their residential mortgage portfolio exceeds an LTI ratio at or greater than 4.5 times income.
Giving lenders the flexibility to provide more mortgages at higher LTI ratios could help to open up the housing market to younger buyers with smaller deposits and who may need to borrow more. A move like this could be particularly helpful for those planning to buy in high demand, high price areas including cities, as well as regions like the South East.
Finding an equilibrium
There are, however, reasons to be skeptical about the changes.
Removing stress testing rules that were set up to protect consumers in the wake of the global financial crisis will almost certainly be a challenging PR exercise for the mortgage market.
A relaxation in regulation is no doubt likely to produce a raft of unhelpful headlines in the national press about a return to the pre-crash times, the fall of Northern Rock and ‘dodgy’ lending practices. Could that, in turn, end up putting buyers off from moving ahead with their plans?
More importantly however, we must also consider whether the consultation could create unintended consequences for the market. The Bank of England has a responsibility to ensure that everyone who can afford to buy has as much opportunity to do so, but it must also consider house price inflation.
The influence of Covid-19 and remote working on buyers, as well as the stamp duty holiday, has created a frenzy of activity in the housing market over the past two years, and this demand looks set to continue.
Legal and General’s latest report has found that as many as one in five people are still planning to relocate to a different part of the UK over the next year, including more than a third in London who are planning to move.
Any relaxation of affordability criteria could prompt a whole new cohort of buyers to enter the housing market at a time when demand has already pushed up average house prices to record levels.
Borrowers face an increase in costs beyond the housing market as well, with a rising cost of living leading to higher food bills and energy prices expected to move even higher in the Spring. This could all leave us at a point where these changes to affordability testing are negated by buyers being priced out of the market as property prices rise ever higher.
That really points me to the answer the housing market has sorely needed for so long – a homebuilding programme that ensures the delivery of thousands more new homes for buyers now and in the future.
Tackling regulatory barriers such as stress testing will certainly have its place, but it will all be for nothing if government and industry do not work together to build the thousands of homes Britain desperately needs.
First-time buyer searches continue to rise near year-end
According to data from Legal and General Mortgage Club’s SmartrCriteria tool, first-time buyer product searches were the third most searched criteria point by advisers in October.
In November first-time buyer searches increased by eight per cent on the prior month.
Searches for gifted equity rose by 38 per cent between October and November, which Legal and General Mortgage Club said indicated that the Bank of Mum and Dad continued to play a pivotal role in first-time buyer purchases.
Overall product searches were up three per cent in November, which suggested the stamp duty holiday did not dampen market activity.
SmartrCriteria data also showed that demand for lenders considering credit-impaired customers fell month-on-month. Missed mortgage repayment searches fell by 10 per cent and customers with debt management plans were nine per cent lower.
Data also showed an increase in searches for portfolio landlords and ex-pat borrowers.
Clare Beardmore, head of broker and propositions at Legal and General Mortgage Club, said it was “promising” to see first-time buyers continue to support demand in the housing market, which she said had remained buoyant despite the stamp duty holiday ending.
She added there were “positive signs” that borrowers were rebuilding their finances as credit impaired searches were falling.
Beardmore said: “Going forward, advisers have an important role to play in helping them find products that meet their unique needs, and the role of technology in this task cannot be understated.
“Automating processes, such as affordability calculations, and other administrative tasks, will create that seamless, customer-led journey, which we are all keen to secure. It’s vital that we sustain the momentum of the past year and ensure that advisers have the right tools in place to respond to the evolving expectations of customers.”
Generation Home added to L&G panel
Generation Home launched in October 2020, and offers a range of products which tap into the support on offer from family members in order to avoid affordability problems, as well as support borrowers who struggle to build a deposit.
The lender tracks monthly contributions from the primary owners and their supportive family members, which are then reflected in individual home equity stakes. The idea is that everyone can then see how much they have paid, and how much they therefore own in the property, in real time.
Danny Belton (pictured), head of lender relationships at Legal and General Mortgage Club, said with house price growth outstripping increases in earnings, first-time buyers needed “innovative mortgage options” that remove the barriers to ownership.
He continued: “Generation Home’s proposition is therefore well timed and likely to support many people to press ahead with their dreams of owning a home of their own. Because this is such a meaningful step forward in the journey to developing innovative lending solutions for future generations, I have every confidence that this will be a welcomed addition by our adviser community.
William Rice, CEO at Generation Home, added: “We believe that the mortgage advice community will play a critical role in educating future Generation Home customers about the benefits of our proposition. This is where our partnership with Legal and General Mortgage Club is key to our success. As the UK’s leading club, we’re gaining access to a broad and engaged community of brokers, that we look forward to working with.”
The lender spoke last year of its aspiration to have whole of market broker coverage in 2022.
L&G Mortgage Club partners with Harpenden BS to offer holiday let exclusive
The two-year discounted mortgage has an initial rate of 2.59 per cent with a £100 application fee, an £800 completion fee which can be added to the loan, and scaled valuation fees.
An early repayment charge of two per cent applies for the two-year period. The product is offered up to 80 per cent loan to value (LTV) on a repayment basis or 75 per cent LTV on an interest-only deal.
There are no upper age restrictions and up to four borrowers per application are accepted.
The deal can be used by borrowers who are purchasing a property as a holiday let that would have previously been labelled for consumer buy-to-let.
The Harpenden will assess the borrower’s financial profile to make sure they have enough funds to afford the mortgage and running costs for up to three months if the property is empty.
There are no restrictions on the location of the property giving prospective buyers wider purchase options within England and Wales. Properties can be adjacent or above commercial premises. Gifted deposits from a family member are accepted and a personal usage allowance of up to 90 days has been introduced.
Danny Belton, head of lender relationships, Legal and General Mortgage Club, said: “Demand for holiday let investments is still surging and we are proud to partner with Harpenden Building Society to respond to this growing appetite in the market with our latest discounted exclusive.
“This exclusive offers advisers welcome access to another competitively priced product, widening the choice they can offer to borrowers looking for holiday let solutions. The Harpenden is a longstanding partner of Legal and General Mortgage Club, and we are pleased to be continuing to expand our offering to advisers with the building society.”
Atom Bank offers exclusive near-prime products through L&G Mortgage Club
The options are suitable for those with imperfect credit scores, such as borrowers who may have missed a payment, as well as those with a past county court judgement or default.
The first product is available at up to 60 per cent loan to value (LTV) and is priced at a rate of 2.45 per cent. The second option offers up to 65 per cent LTV, with a rate of 2.69 per cent.
There is also an up to 70 per cent LTV product with a rate of 2.74 per cent and a 75 per cent LTV option at 2.89 per cent. All four products offer £250 cashback.
Danny Belton, head of lender relationships, Legal & General Mortgage Club said: “The unprecedented economic challenges caused by the global pandemic clearly demonstrate the importance of offering a varied and accommodating range of products for borrowers.
“We are therefore proud to announce these new product exclusives with Atom Bank which are tailored to support those with credit impairments, and we look forward to expanding our offering in the coming months.”
Paula Mercer, head of lending and digital mortgages at Atom Bank, said: “Our near prime mortgages are built for customers with less-than-perfect credit.
“We are delighted to offer Legal & General advisers access to an exclusive range of near prime products, opening up the market to those who may have trouble securing a mortgage from a traditional lender.
“The range allows us to support borrowers who have had previous financial difficulties, such as CCJs, defaults, and missed payments.”
Melton’s MBS Lending launches online application portal
MBS Lending, a subsidiary of the Melton Building Society, opened the platform to its intermediary panel after a successful pilot with Legal & General Mortgage Club and Sesame Bankhall Group.
MBS Lending is the first lender to adopt the Mast broker portal which will accelerate the application process for intermediaries and deliver bespoke document requirements for all cases to help improve packaging.
Dan Atkinson, head of intermediaries at the Melton Building Society said: “We’re committed to continually improving our service to intermediaries so we’re very excited to deploy the Mast broker portal for MBS Lending.
“The switch from a paper-based application system has been smooth, with the Mast team onboarding us in record time and rapidly turning around feature requests and improvements.”
Joy Abisaab (pictured) chief executive at Mast, added: “Our platform will allow the society to improve the whole origination process and increase conversions while delivering a top-class service, enabling faster lending decisions.”
The new platform has been built with both brokers and lenders in mind, enhancing both the broker application journey and enabling streamlined processes for MBS Lending internally, improving efficiency and allowing faster decision making.”
Hinckley and Rugby launches L&G Mortgage Club exclusives
Club members will be able to access a five-year fixed rate mortgage, available up to 90 per cent loan to value (LTV), at 2.58 per cent with a £199 arrangement fee. The exclusive range also includes a pair of two-year fixed rate mortgages, both available up to 90 per cent LTV and with a £199 arrangement fee.
The first two-year fixed product is priced at 1.8 per cent, but comes with valuation fees, while the other has no valuation fees but borrowers face a rate of two per cent. The valuation fees charged range from £185 to £3,615, depending on the purchase price.
Danny Belton (pictured), head of lender relationships at the L&G Mortgage Club, said that advisers face added pressure to source “competitively priced product options” for their clients given the speculation surrounding a potential base rate increase.
He added: “With this latest raft of exclusives, we expect to help broaden the choice presented to our advice network when placing suitable customer cases. This is certainly a timely and important addition to our proposition and we’re pleased to be offering the discounted products through Hinckley & Rugby Building Society.”
Julie Bourne, intermediary sales manager at Hinckley and Rugby Building Society, emphasised the mutual’s commitment to supporting brokers and their clients, adding: “These products, which are offered up to 90% LTV, will increase the options available to mortgage customers, particularly first time buyers, who want to take the next step as homeowners.”