We can support landlords to succeed in an increasingly arduous industry – Rowntree
This is driven by a number of factors, such as the growth of both single person households and the wider population, limited supply of social housing and an increase in the gap between average house prices and salaries.
Although various schemes have existed to increase homeownership, the first rung of the property ladder remains a step too far for some – purchase prices have swelled at the sharpest rate in over a decade to reach record levels.
Large-scale build-to-rent (BTR) developments have been touted as a threat to private landlords’ livelihoods, but up to this point have targeted a relatively small section of the rental market through largely upscale city centre offerings.
Recent analysis by Knight Frank highlights how this is set to change with billions of pounds worth of funding earmarked to see BTR move into suburban areas to target families.
It is estimated that the UK will need 1.8 million new households over next decade however, so I feel the important place of private landlords will remain.
Most landlords have good tenant relationships
Not everyone agrees it seems, and instead of viewing landlords as part of the solution to the UK’s housing shortage, they are often seen as greedy property barons who profit from letting low quality homes to those who have no choice but to endure the conditions.
In our new Landlord Report 2022 we combined our understanding of Paragon landlord customers with third party insight to come to a contrary conclusion.
Countering the negative perceptions of landlords that are often perpetuated in the media, we see that the majority of landlords enjoy harmonious relationships with their tenants who tell us they are content with their privately rented home. Of course, issues do arise but are often resolved through a pragmatic approach to problem solving.
Unfortunately, accommodating tenant requests to keep a cat or make up a missed rent payment does little to overcome what landlords have long seen as their main challenge – government policy that makes letting property more work for less reward.
Analysis of data has suggested that a shift away from tenure neural housing policy has ultimately caused some landlords to exit the sector. For example, Zoopla figures for the proportion of properties listed for sale that were previously rented have quadrupled since Q1 2018, highlighting an upward trajectory that is getting steeper.
While we don’t know if these properties remain in the private rented sector – are amateur landlords capitalising on the current high house prices by selling to professionals? – or if homes move into other tenures, there is lots of anecdotal evidence of landlords calling time on their lettings businesses.
EPC requirements opportunity for brokers to proactively support landlords
One of the most pressing regulatory changes set to impact landlords is the proposed amendment to EPC requirements, something I see as an example of how the sector can take a proactive part in supporting landlords.
In addition to working with the government, making them aware of the scale of the issue and the implications of the policy, lenders can provide products that make it possible for landlords to make the necessary adjustments to their portfolios.
This is something we’re currently working on, and with a new problem requiring innovative solutions, brokers can play an important part in helping their landlord customers stay up to date on any changes and find the finance needed to ensure they comply.
YBS Commercial adds relationship director to its North team
She joins from Lloyds Banking Group where she worked for around 19 years in various roles, including commercial relationship manager.
In that role she gained experience around real estate and client portfolio management, according to YBS Commercial.
She will be based at the YBS Commercial office on Cross Street, Manchester, and at the YBS branch on Fishergate, Preston, from which she will be covering the Northwest.
Guy (pictured) said she was delighted to come onboard and “use my skills to add real value to the business”.
Sarah Prescott, regional director for the North team, said: “I’m so pleased to welcome Jennifer to the North team. I have high hopes both for what she and the North team can deliver now that we’re operating at full capacity.”
Guy will be working closely with other North team members including Sarah Prescott, relationship directors Georgie McRoberts, Rob McFarlane and Chris Butler, who joined in April, and relationship managers Jack Dunne and Dan Wisson.
Catalyst Property Finance targets £500m loan book
Speaking to Specialist Lending Solutions, chief executive Chris Fairfax (pictured), said that within that £500m target it is setting its sights on non-construction bridging, ground-up development finance, construction bridging, and buy to let, at £100m to £150m each.
Fairfax said that buy to let is a vital component of this as it needs less origination.
“Short-term lending is hard work, you have to originate every 12 to 18 months because your loans, hopefully, have redeemed. Buy to let allows us to achieve some of our strategic goals,” he said.
The lender entered the buy-to-let space earlier this month, with rates starting from 3.74 per cent and up to 75 per cent LTV available, including those with cash-out.
Fairfax said that brokers and consumers they had spoken with said that they wanted “less restrictions on property”.
He pointed to several underserved areas, which include no exposure limits on multi-unit blocks (MUB), mixed use property, no restrictions on the number of bedrooms in houses in multiple occupation (HMO) and holiday lets.
Citing the typical market minimum at 125 per cent, Fairfax said that another opportunity would be less constrained by income variations, as its interest coverage ratio calculations are from 100 per cent of the pay rate.
He added that unlimited top-slicing was also available for high-net-worth individuals, and that the firm also has wide eligibility on adverse credit and different kinds of company structures.
“The feedback we’ve had from brokers so far is that there’s a place for it, but obviously they’d like it to be cheaper in terms of its interest rate. Ultimately, we have to find the right balance. We want to fund the right opportunities where it’s right for the borrower and right for us,” Fairfax said.
“We recognise our rates are higher, but we serve a market where there is a clear benefit in acquiring or refinancing because of either the yield or the capital.”
The firm issued £15m in agreements in principle on the first day that it launched its buy-to-let offering.
Fairfax continued that CPF currently has eight staff working on buy to let, who have been trained across bridging and buy-to-let too in case of a “big inflow of more kinds of business they can adapt.”
Catalyst is aiming to bring longer-term fixed buy-to-let products to the market, and is also considering green mortgage products.
Vida unveils exclusive club for industry leaders
This in turn, the lender says, will lead to better solutions for clients, many of whom are underserved by mainstream lenders.
The club was launched at an event in London yesterday. Founding partners, of which there are already 50, come from across clubs, networks, specialist distributors and new build.
Members can access exclusive products and will be able to build Vida’s proposition in partnership with lender, as it provides a space for debate and discussion.
There will be exclusive content, events and marketing support for members too.
The lender said the club was the “next stage” in its journey to create a structure, processes and environment to acknowledge differences in the market and to improve the journey for all parties.
Richard Tugwell (pictured), director of mortgage distribution at Vida, said: “Our partner companies told us that to build a greater understanding of their market needs they wanted to work more closely with us and co-create solutions for their clients. The V Club gives us the platform to make this happen and to support them as we continue our growth.”
BSLS2022: Consumer duty ‘much more significant’ for specialist lending sector
Speaking at the British Specialist Lending Senate, Robert Sinclair, chairman of the Association of Mortgage Intermediaries said that upcoming consumer duty was a “fundamental sea change from treating customers fairly”.
The Financial Conduct Authority (FCA) launched a consultation into a new consumer duty at the end of last year, saying at the time that it had seen multiple examples of firms presenting information that exploited the behavioural biases of their customers, sold products or services that were not appropriate, or poor customer support.
He explained that it was about “being able to evidence that the customer got what they expected”.
“How do you evidence that you’ve had that dialogue with the customer to prove that? That they are getting the right product for their needs is what sits at the heart of this and delivering that expectation is a very, very difficult contract to meet,” Sinclair added.
He noted that if companies had to prove when they market and design a product that the receiving customers “actually got the right thing”, it could be “really complicated”.
Sinclair continued that this change could be “much more significant” for the specialist lending market as it potentially had a higher cohort of people who could potentially be deemed as vulnerable.
He said evidencing and measuring vulnerability would be very challenging, adding that the vulnerability assessment will have to become “more tangible”.
Sinclair said key four outcomes of consumer duty were effective communication, assessing products and services, price and value.
He said the crucial element for him was around defining service proposition, stating that the way consumer duty is currently drafted means lenders and brokers are responsible for their own service proposition definitions, not each other’s.
Another key element centres around justifying the price set and how this works for different business models.
Sinclair said the crucial thing is whether the work differential enough to justify the fee, and if it is, are you allowed to add it to loan with the lender, which is something the lender may disagree with.
He said the debates around this would occur over the next two years.
He added there were multiple questions around how you demonstrate the customer has understood the product, how the lender feels comfortable that the broker or intermediary has “sold it in the right way”, and where the responsibility lies between the lender and the broker.
Sinclair this could raise questions about whether lenders may want to “limit and close off their distribution” as they want “assurance that those distributors really understand the product”.
“It becomes a really interesting problem about how we do this in this marketplace, particularly in the specialist marketplace. You have master brokers, instructors, and packagers that are specialists in space and therefore it works well. Is that the world we will have to model more on?”
He added that there were also questions around how feasible the 12-month implementation timeline would be and how the Financial Ombudsman would interpret it.
“They don’t have to think about what the rules are, as in the rules say we’re allowed to do this, so I’ll judge what’s fair and reasonable. That is not a structure that is sustainable in the long term with PII (professional insurance indemnity) cover in the shape it’s in at the moment,” he said.
Appointed representative regime in FCA sights
Sinclair said the regulator decided the current AR regime is “fractured and broken” due to actions in other sectors.
The FCA launched a consultation into the AR regime to address a “wide range of harm” caused to consumers. This includes inadequate due diligence in appointing an AR, as well as insufficient oversight and control post-appointment.
He continued that draft definition for upcoming AR changes centred on the regulatory hosting definition, which allows businesses to carry out regulatory activities without directly being FCA approved.
Sinclair said using this definition could force networks to have something in-house around advice so they can evidence they are doing some of the advice or will there be mortgage market exemptions.
“Not many networks want to start doing the advice themselves because the model is built on the fact that they provide the infrastructure and tools,” he said.
He added that another concern from the regulator was that some ARs are “too big”, with one suggestion being that AR firms over a certain turnover firms may have to become directly appointed.
Sinclair pointed out this could be very damaging if certain ARs with significant income are forced to walk away from networks.
“We have business agreements that keep them tied in. But we have a regulatory contract that says you’ve got to leave. It doesn’t work in any understanding that I have of how regulation should work in the commercial world,” he said.
Sinclair continued that the concept of the self-employed could also change, as the regulator was “saying explicitly” that the principal firm should take total accountability on ARs “for the work they do under your licence, and for anything they do that you should not be allowing them to do”.
The British Specialist Lending Senate 2022 in pictures
Mental health: ‘Promote the culture that it’s okay not to be okay’ – Marketwatch
Depression, stress, anxiety, burn out, negative life events, financial difficulties, social stress, exhaustion, loneliness, frustration, pain, sadness, and loss are all a part of life, but that doesn’t stop them being really hard.
No matter our role in society or our respective companies – everyone is fighting their own battle, and often trying to fight the battles of the people they care about too. Most of this is done in silence, catalysed by lockdowns.
With that in mind, and seeing as this week is Mental Health Awareness Week, Mortgage Solutions is asking: How has your company’s attitude changed toward mental health?
Jane Simpson, managing director, TBMC
Covid and the lockdowns definitely had an impact on the mental health of people across the country and in every office. As an employer we were very focused on mental health throughout the pandemic, and that hasn’t gone away. We have more open and honest conversations about how our staff are feeling and support them on a deeper level. Having those initial conversations right through COVID has opened the doors to a more open, lasting, and honest dialogue about mental health.
We provided a lot of training and information to our management team throughout the pandemic, which will help them recognise issues early on and deal with a changing workforce.
We found that offering more flexibility with working arrangements, changing to a fully hybrid working office with designated days in the office to collaborate and socialise, gives a better work/life balance. Hybrid and remote working has also benefitted the business, enabling us to employ staff from a wider geographical area and giving us a higher overall quality of candidate to choose from.
Everyone is different, so we discuss working patterns individually. We have seen more staff asking to alter their hours, which has been driven by people re-evaluating their lives during lockdown and wanting to spend more time with family or on hobbies to give them a better quality of life, which we fully support.
Varied mental health support options are key to this too. We have a wellbeing support team for physical, emotional, financial and social support, free access to the NHS Thrive app, and a 24/7 online GP offering mental health counselling among other services.
Naomi Braisby, human resources director, Landbay
At Landbay we are seeing the stigma around mental welfare being lifted, and people are more willing to talk about it and share their experiences, which means we can give colleagues the resources they need much earlier than before.
We promote the culture that it’s okay not to be okay, and encourage people to speak up when they need support. Within the business, we have trained mental health first aiders and an approachable HR team, providing a point of contact and support, and an external employee assistance programme to provide 24/7 professional counselling. We also have “Time out Tuesdays”, where we organise activities for the team to take time out of their day and focus on their wellbeing – we arrange everything from in-office massages to hotpod yoga.
The wellbeing of our team really matters, and the culture here has always been very supportive. We are like one big family – we are still there for one another as we were before and during the lockdown.
Jason Berry, group sales and marketing director at Crystal Specialist Finance, and co-founder at MIMHC
What started off as a Crystal macro-focussed project has now expended to make it a wider market conversation through the Mortgage Industry Mental Health Charter (MIMHC).
What we saw with the internal focus is that our staff needed support and conversation around how they’re feeling to be encouraged, but more importantly, they needed to feel listened to. We put frameworks in place and listened to how they wanted to conduct their work, which has really improved things.
This is serious for us, it’s not just words. Yesterday we had a coffee roulette – our 58 staff members were paired up randomly to have a 30 minute chat with people they wouldn’t normally talk to about how they’re feeling. As a result of this and other changes, our staff now feel listened to and more motivated.
We also conducted an industry survey in Spring 2021 and found that 75 per cent of respondents said their company offered no mental health support. Turning this around is our number one aim.
Off that research, we could see that mental health and issues have been ignored industrywide, so we created MIMHC to come together as an industry and ensure all companies get mental health on their radar, and to stop staff suffering in silence.
MIMHC is only about six months old, but we’ve already got 35 signatories from a really lovely cross section of the industry. We want to get over 200 signatories by the end of the year. We do a quarterly newsletter and provide access to our website with expert-led reference material and guidance.
This spring we found that 46 per cent of companies have mental health frameworks now, which is amazing, but it still means we’ve got 54 per cent of businesses without it, so we’re only just getting started. I think there’s forward momentum around the topic, especially this week, like Shawbrook with its mental health adviser scheme, but even around this week we’re seeing more action.
However, the 2022 survey also showed that there’s still a lot of people who don’t feel great. Brokers are working longer hours and the continually busy market place is running people down from a lack of sleep and continued work stress over years.
I think, despite the progress, everyone knows that we’ve still got a lot of work to do.
You can sign up to MIMHC here.
Homes for Ukraine pitfalls worth an intermediary double-check – Wilson
We would perhaps have suspected nothing less and I hope that the administrative problems and issues which appear to have blighted the scheme are starting to be sorted out, and that refugees are beginning to be housed here in order to give them the stability and safety they need and deserve.
I’m led to believe that the numbers are rising – although probably still not fast enough – and that progress is being made.
Implications for equity release and later life clients
You might wonder why I’m raising this in an article which is normally about the equity release and later life market, and for an adviser audience, and the reason is that the Homes for Ukraine scheme does have implications for equity release and later life customers who are opening up their homes to refugees.
It’s something that advisers, and clients, need to be aware of because just as lenders and providers would want to know if a customer of theirs had new adult residents in their property, this might also be the case with the Ukraine scheme.
Of course, lenders and providers are obviously sympathetic to what is happening in this situation and the decision the homeowner is making, so there may not be a major concern here, however advisers should still make their existing and new clients aware of this.
For members of the Equity Release Council, there is already a document available – helpfully put together by the council – which covers how all equity release and later life lenders and providers are approaching this issue. It can be accessed via the members section of the council website.
It could affect clients’ insurance
However, one further aspect which I’m not sure has been covered and may be as relevant in the residential borrower space as the later life one, is how insurers might approach new people being resident in the home?
I’m not fear-mongering here, but as a worst-case scenario, accepting refugees into a residential home might invalidate some insurance policies, although again I’m sure there will be sufficient flexibility provided by the insurer.
Clearly, we don’t want to put off any family or organisation that wants to shelter refugees. But we might suggest they double-check just to understand how they might view this, and whether there are any potential ramifications for such a decision on existing policies, particularly in terms of contents insurance and the like.
Opening one’s home to those fleeing such a terrible situation is a wonderful thing to do, and it’s my sincere hope that more people will continue to do this, and our government goes the extra mile to make the most of this generosity.
If you, or an organisation you represent, want to record your interest to take part in the Homes for Ukraine scheme, you can do so here.
Brokers who do the least business take up most of lenders’ time – Star Letter 06/05/2022
This week’s comment came in response to the article: Randomised BDM help desks weaken lender-broker relationships – analysis
Arron said: “According to a Paragon poll, most brokers submit around 40 cases a year. The Financial Conduct Authority (FCA) suggests most brokers only use three to nine lenders.
“Many business development managers (BDMs) have told me it is these brokers who do so little business and lack experience with lenders that can take up 80 per cent of their time – Pareto’s Law – going through every part of the application process. This time is better spent responding to more productive brokers.”
Landlords selling up
The second comment came in response to the article: Dramatic rise in number of no fault evictions
Charlie said: “A lot of landlords are selling up, in this case there would be a Section 21 notice. They [government] wanted rid of private landlords and it’s starting to happen, especially the smaller one to three property landlords.”
BoE rate decision could spur borrowers to take out long-term fixed rates
John Phillips, national operations director at Just Mortgages, said that the 0.25 per cent increase “came as no surprise to anyone” as the chancellor had warned rates could hit 2.5 per cent by the end of the year.
Phillips said that along with the cost of living crisis, the rate rise could mean pressure on household budgets will become the “greatest it has been for a decade.”
“While consumers have little control over their energy bills, they do have the opportunity to secure long term security in the form of a fixed rate mortgage. As a result, our network of mortgage advisers report that conversations with borrowers around longer-term fixed rates have never been higher,” he explained.
Colin Bell, co-founder and chief operating officer of Perenna, said that lenders had pulled 500 mortgage products, and average two-year fixed rates had reached a seven-year high.
He said: “This is clearly having a detrimental impact on consumers’ ability to get onto the property market. Flexible long-term fixed rate mortgages can provide a solution to the problem, allowing individuals to better manage their monthly outgoings, while avoiding any unnecessary stress caused by multiple interest rate rises.”
Figures from Moneyfacts show that the price of a five-year fixed rate mortgage is 3.17 per cent, whereas the price for a 10-year fixed rate is at 3.21 per cent.
Rachel Springall, finance expert at Moneyfacts, said: “Fixing for longer may be a logical choice for peace of mind with mortgage payments when other household costs are increasing. The differential between the average two-year and five-year fixed mortgage rate is much smaller than in previous years.
“However, aspiring homeowners may need to rethink whether they can even afford to step onto the property ladder due to rising costs and soaring house prices.”
Simon Webb, managing director of capital markets and finance at Livemore, said that there has “never been a better time” for borrowers to take out a longer-term fixed rate mortgage, as there would be further base rate and inflation increases this year.
“This will give people peace of mind that their monthly payments will remain the same for the long-term fixed period they choose,” he said.
Variable rate borrowers should opt for fixed rates
Brokers said that the base rate hike will obviously impact those on variable rates, and urge these customers to switch to a fixed rate.
Richard Pike, director at Phoebus Software said that the price increases could impact one in five borrowers, or around 800,000 mortgages.
Springall said that the difference between and average two-year fixed rate and a standard variable rate (SVR) is 1.75 per cent. Switching could save around £4,611 over two years based on a £200,000 mortgage over a 25-year term on a repayment basis.
She added that a rise of 0.25 per cent over the current SVR could add around £695 to total repayments over two years.
David Hollingworth, associate director for communications at L&C Mortgages, said: “Borrowers wallowing on lender standard variable rates have the most to gain from a review of their mortgage.
“Not only could they cut the cost of their mortgage and breathe some added flexibility into their monthly budget, but they could also elect to fix their rate to protect against the potential for further rate rises.”
Mark Harris, chief executive of SPF Private Clients, looks at the raise as demanding an extra £250 a year for every £100,000 on a variable rate remortgage, which adds up.
He said that those on variable rates may want to consider long-term fixed rates as they were “particularly competitively priced” but warned that there could be “heft early repayment charges (ERC)” if a borrower wanted to get out of a deal earlier.
‘Stampede’ of remortgage activity
Others said that the decision to increase the base rate to one per cent today could further heighten remortgage activity to a “stampede”.
Simon McCulloch, chief commercial and growth officer at Smoove, said: “Today’s rate hike could see the present rush to remortgage turn into a stampede. We are already seeing a surge in remortgaging.”
He explained that in the previous quarter, legal instructions on Smooves platform had gone up 67 per cent year-on-year and were up 15 per cent on the previous quarter.
“Expect frenzied refinancing and a very busy time for lawyers and mortgage brokers as the rate hiking cycle continues,” he warned.
Pike said that those looking to remortgage could find themselves having to accept a higher rate.
He added: “Brokers could be approaching their clients earlier and advising them to apply for a new fixed rate which will be valid for three to six months, depending on the lender.
“By locking in to a lower rate now rather than waiting to apply when their current deal comes to an end, borrowers should end up with a better deal.”
Harris added that activity in the remortgage market was “brisk” and some borrowers were considering paying the ERC to leave their existing deal early before prices rise even more.
“This can be worth doing but it is important to ensure any savings you make to your mortgage payments outweigh the costs involved. Rates can be booked up to six months before they are required and we are getting a lot of interest from motivated borrowers in doing this,” he said.