InterBay launches semi-commercial mortgages
Under the range, commercial income can be considered alongside residential income, with loan to values (LTV) up to 70 per cent.
Rates start from 4.79 per cent for a two-year fixed rate at 60 per cent LTV.
Minimum loan size is £150,000 and interest-only or owner-occupier are also considered.
Adrian Moloney, group sales director at OneSavings Bank (pictured), said: “This is an exciting range for InterBay Commercial and something I know our broker partners have been asking for.
“It was really important that we followed a structured approach to ensure we could fulfil market requirements and be transparent on the parameters around which we can confidently do business.
“Let’s be clear, these are still testing times, however with the experience and knowledge that InterBay Commercial brings to its intermediary broker partners, we’re absolutely confident that now is the right time to bring this semi-commercial offering to the market,” he added.
The rise of ‘odd’ is an opportunity – are you keeping up? Adrian Moloney
According to research by IMLA, specialist lending is currently at a three-year high. The number of specialist applications that have led to completion increased by nearly 20 per cent between 2018 and 2019, while separate research has found that three in four intermediaries are confident about specialist lending opportunities.
There are good reasons for this. Huge shifts are occurring from types of employment to tenure, and these are affecting the shape of the industry as a whole. As time goes on, the traditional “one size fits all” approach is becoming increasingly out-dated.
As a nation we are adopting progressively varied working habits and this has meant that we have more complex sources of income. Indeed, according to figures from the Office of National Statistics, 4.8 million people in the UK are currently self-employed making up 15 per cent of the total workforce. Meanwhile two million professionals are currently classified as professional contractors, up 43 per cent since 2008.
Increasingly, workers are embracing more flexible working lives and less linear career paths. However, the high street banks have failed to catch up with these trends and many are unwilling to provide a mortgage to those customers that sit outside of the box.
Alongside the changing work pattern trends, the number of individuals with an adverse credit rating is also rising. It’s no longer unusual to have a slight blemish on your credit rating, and this is having a direct impact on the mortgage market and the service lenders should provide. For example, in the last year alone, there were more than a million County Court Judgements (CCJs) in England and Wales – twice the level seen five years ago.
While this number will include those who have defaulted on credit agreements running into thousands, it could also include those with an unpaid or disputed parking fine of £100. Yet, when it comes to applying for a mortgage, both fines could be viewed in the same light through an automated application process and effectively rejected.
At the other end of the scale, many consumers have no credit history whatsoever or have not been a named individual on household bills. Experian estimates the number of people who are “financially invisible” and will struggle to secure credit, could be as high as 5.8 million.
At the same time as borrowers’ finances becoming more complex, the housing market is evolving, as is the mortgage market that supports it.
Historically high house prices continue to cause affordability issues, requiring larger loans, and larger deposits. We’ve witnessed government intervention including Help to Buy, changes to stamp duty, and the support of shared ownership schemes. The market has also responded, with lenders developing new product types, and specialists offering broader criteria reinforced with manual underwriting that complex cases require.
The rise of ‘odd’ customers
The number of ‘odd’ customers is on the rise, and they are underserved by lenders. As well as being a growing market in terms of the number of individuals involved, it can also be a more valuable one for brokers. It’s estimated that specialist cases with complex incomes or impaired credit could earn brokers up to 68 per cent more.
For brokers thinking about diversifying into this market they need to get to know the specialist lenders that are willing to lend to these ‘odd’ customers.
Brokers that take the time to improve their knowledge, especially during this transitional time, will be well placed to provide tailored and accessible solutions for their clients.
Lenders urge FCA to honour MMR advice commitments
A panel of lender representatives attending FSE London were asked by Robert Sinclair, chief executive officer of the Association of Mortgage Intermediaries, whether the regulator’s Mortgages Market Study had warranted the outrage it has provoked.
Esther Dijkstra, director of strategic partnerships at Lloyds Banking Group, called on the industry to continue to challenge the FCA’s focus on price being the main determinant of how suitable a mortgage is, arguing that the regulator needs to be convinced that this is not the case.
She also suggested the regulator should instead cast its eye over the “haves and have nots” which holds back some people from accessing advice.
Adrian Moloney, sales director at One Savings Bank, emphasised that with a “minefield” of borrowing options “advice is key”, while Chris Pearson (pictured), head of intermediary mortgages at HSBC, urged the regulator not to “row back from the mortgage market review (MMR)”.
The panellists were also asked for what advice they would give to intermediaries in order to improve their offering.
Andy Dean, head of intermediary support at Nationwide, urged brokers to look at the opportunities in specialist lending, noting there were “lots of areas showing a high degree or resilience and growth”, while Jeremy Duncombe, director of intermediaries at Accord, suggested brokers should use technology “to do all the hard work”.
System integrations being pushed into next year – Duncombe
The last year has also seen mortgage clubs and networks take an increasingly active role in the space as they seek to make their processes more joined up.
Speaking at the Financial Services Expo, Accord Mortgages director of intermediaries Jeremy Duncombe (pictured) said that lenders were looking at what they wanted to invest. He added that from a broker perspective, it could appear that nothing much has changed.
“On the technology side we’ve heard a lot and not seen a huge amount delivered, so I’m still waiting,” Duncombe said.
“The integrations that people promised would happen in the early part of this year seem to have been pushed into next year,” he added.
This point was echoed by HSBC head of intermediary mortgages Chris Pearson who said the lender was “starting to see a little more movement in third-party fintechs looking at how they integrate with lenders and brokers or networks.
“And there’s still quite a bit more to do on that,” Pearson said.
One Savings Bank sales director Adrian Moloney added that it was a case of lenders making sure they were “backing the right horses”.
Meanwhile, Lloyds Banking Group director of strategic partnerships Esther Dijkstra highlighted that networks and clubs were starting to get involved.
“Looking back 12 months, the incumbent players, some of the mortgage clubs and networks have made huge investments in technology.
“They are buying different parts of technology and they have linked-up more to make it an end-to-end operating model,” she added.
Dual pricing execution-only transfers could push customers down wrong route
Duncombe, director of intermediaries at Accord, claimed that if regulators allow lenders to make rates cheaper, it could encourage clients to use the unregulated channel.
As part of the lender panel at the Financial Services Expo, Duncombe said: “If you get cheaper rates doing execution only that’s a huge issue.
“But even just trying to push more people on an execution route because they think that’s the way people want to go; I think it’s the wrong way.
“We’ve got to do that as a sector. It’s fine for the right people but we’ve got to work out who those people are.”
Adrian Moloney, sales director at One Savings Bank added that it was “unsurprising” that some customers had shifted to execution-only products but said he could only see “certain generations” opting for it.
OSB overhauls national accounts team and promotes pair
As part of the shake up the lender has announced two key broker-facing appointments.
Emily Machin (pictured) has been promoted to senior national account manager to head up the national account team and the administrative functions that support the team.
Machin was previously national account manager for Kent Reliance – she joined the lender from TSB in 2016.
Marc Callaghan has been promoted to national sales manager for InterBay and will assume day-to-day management responsibility of the senior business development team.
A key focus of his role is to ensure the growth of the commercial arm of the business continues, with support from the experienced BDM team.
Exciting role and opportunity
One Savings Bank sales director Adrian Moloney said the lender had been working hard to ensure brokers were supported with the right level of expertise delivered at every stage of the client journey.
“These appointments, within our new broker centric framework, demonstrate our ongoing commitment to the intermediary market throughout 2019,” he added.
Machin said: “This is an exciting role and an opportunity to evolve the national accounts team. I am looking forward to working closely with our distribution partners and strengthening the relationship across all OSB brands.”
Callaghan said he was delighted with the move and the opportunity given by OSB.
“I’m looking forward to working directly with our key broker partners to help streamline their heavy caseloads as part of our ongoing broker service enhancement programme,” he added.
Is the North the new South? Changing dynamics in the UK’s property markets – Moloney
In the South the property market has primarily been driven by London, experiencing higher house price growth over the last decade and providing buy-to-let landlords with a fertile hunting ground.
But growth in the South is slowing, led by a cooling in the rise of property values as house prices may have reached their zenith.
So is the North going to continue to be of interest to property investors going forward?
Estate agent Savills forecast house prices to rise the most in northern England, the Midlands and Wales over the next five years.
Indeed, it predicts the North West will see the fastest growth in house prices, up 21.6%, followed by Yorkshire and Humberside (20.5%), the East and West Midlands and Wales (19.3%) and the North East (17.6%).
In comparison, Savills estimates growth in London of just 4.5%, with 12.4% for prime central London.
With these regions expected to witness significant house price growth in the next few years, the capital gains alone would be attractive to property investors as higher yields usually provide greater or clearer affordability and makes our job as buy-to-let lenders easier to approve funding for.
Yields, returns and demand high
Kent Reliance’s latest Buy to Let Britain report looked at the current yields within the private rented sector (PRS) by UK region.
It found that the North West had the greatest rental yields at 6.2%, with Yorkshire and the Humber at 6% the next in line.
Areas where landlords could expect the greatest annual returns included the North West with 11.7% and the East Midlands at 11.2%.
Demand for properties in the North and Midlands is also growing, particularly in cities such as Liverpool, Manchester and Birmingham which have had significant investment in their infrastructure.
This has led to more jobs in these regions, while continued high prices in London have seen young professionals choosing to stay put close to the university cities they studied in.
These changes also make cities appealing to those looking to relocate.
Indeed, the Hometrack UK Cities house price index found prices in these cities had gone up by over 6% in the last 12 months as demand grows.
So for brokers whose clients are actively researching the northern property market for the first time, consider those lenders who have an active presence in the locality and understand the local market dynamics.
Is now one of the best times ever to be a broker? – Moloney
In fact, I am beginning to wonder if there has ever been a better time to be a broker.
The most recent report from the Intermediary Mortgage Lenders Association (IMLA) suggests demand for professional advice amid these uncertain times has reached an historic high.
Increasing complexity in the market place is supporting demand for expert advice from brokers. Wherever you look, options for mortgage applicants have become more varied.
First-time buyers, for instance, are faced with an array of options – whether Help to Buy, shared ownership or shared equity.
The buy-to-let market is another case in point.
Following the raft of taxation and regulatory changes it has gone through, lenders have reacted to the new landscape by offering record variety in mortgage products.
Fragmentation has also supported the need for advice. The Prudential Regulation Authority rules introduced in September 2017 have essentially created two classes of landlords bringing more complexity for portfolio investors.
At the same time, taxation changes have meant a steep rise in the amount of technical knowledge required to meet a portfolio investor’s specialist needs as they take new approaches.
For example, operating via a limited company or to diversifying their portfolio away from traditional residential stock.
Our research found that 51% of brokers have been approached by landlords looking to diversify – 56% into houses of multiple occupation (HMOs), 14% into commercial property and 9% into mixed use.
Reasons to be cheerful
As the demand for brokers continues to improve, so too have the tools available as lenders are developing solutions to make brokers’ lives easier.
Despite the gloom, there are in fact plenty of reasons for brokers to be cheery.
At this time of uncertainty and market change, the proportion of landlords that now need experienced, professional advice is likely to increase.
This is the time where trusted advisers can make the most impact.
OSB’s Prestige eases second charge rates and criteria despite raising risk concerns
The moves come after OSB sales and marketing director John Eastgate recently told Specialist Lending Solutions that risk in the second charge market was not necessarily being reflected in prices.
“We have certainly seen pricing in second charge markets falling for some while, to the extent that we have, at times, determined that the risk-reward dynamic was not one we were comfortable with,” Eastgate said at the time.
This came after the firm admitted in its half-yearly interim results that it was not willing to increase lending risk to maintain its market share.
When asked about its previous concerns, Adrian Moloney, sales director at OSB (pictured), said: “These changes reflect our commitment to the second charge market and, when combined with recent changes to our mortgage propositions across the OneSavings Bank group, enable us to maintain our position at the forefront of helping brokers with specialist cases.”
Rates and criteria eased
The second charge arm of One Savings Bank (OSB) has now cut its cheapest rate to 3.69% while also cutting rates on some of its near prime range.
Prestige has also removed the minimum credit score for prime product applications and the loan term can exceed the remaining term of a first-charge mortgage.
And where only one year of self-employed accounts are available, an accountant’s projection can now be used on prime products only at up to 85% loan to value (LTV).
Darrell Walker, head of sales second charge and commercial lending, OneSavings Bank, added: “Second charge mortgages provide a unique tool and proposition that compliments the wider first charge market and we are delighted to bring to market some significant rate reductions supported by several criteria enhancements.”
The changes were backed by Martin Reynolds, chief executive at SimplyBiz Mortgages and Rob Jupp, chief executive at Brightstar.
Reynolds said: “It’s great to see a lender such as Prestige, with OSB’s strong pedigree, championing direct access and making second charges accessible to a wider market.”
One Savings Bank contributes £50m to Oblix Capital funding
Oblix Capital said the new funding line together with its own proprietary funds will allow the lender to grow its product range and appetite.
Its CEO Rishi Passia (pictured) said: “We have witnessed exceptional growth over the past four years, and we’re very much excited about this new partnership as we look to further fulfil our strategic ambitions.”
Managing director Anuj Nehra said: “The added capacity provides us with over £100m of funding and allows us to deploy our capital wisely.
He added that this was a big step forward for the lender. “We have had to step up collectively as a team and I am happy to say that the team responded brilliantly,” he said.
OneSavings Bank head of secured finance Steve Attree added: “OSB has been providing senior secured funding lines to experienced, good quality lenders in the specialty finance sector for the past four years and we are pleased to welcome Oblix Capital as a new relationship.”