John Charcol directors leave to set up SJP wealth management business
Williams had been sales director and Larkin marketing director at John Charcol before starting the new wealth management business based in Hampshire.
The pair had joined John Charcol’s board in 2016 after selling their Southampton-based call centre operations Simply Finance Group to the broker.
Williams said: “We both enjoyed our time at Charcol helping our Southampton staff and customers successfully transfer over, as well as working with some great people in London, but we felt the time was right to run our own business again.
“St. James’s Place was the ideal network for our move into wealth management and support our plans to rapidly grow the team and add funds under management.”
Larkin added: “We are looking to team up with mortgage advisers and other professional introducers whose clients need financial planning advice.
“We also offer a route for mortgage advisers who are at that point in their career where, with support and leads, they can obtain their diploma qualification and move across into financial planning.”
Budget lacked scale of ambition to really solve housing problems – IMLA
In his Budget Hammond announced a raft of measures to intended to tackle the housing crisis. Aside from slashing stamp duty for first-time buyers (FTBs), the chancellor also introduced a range of supply-side moves in the form of £15.3bn of new financial support – taking the total amount committed to capital funding, loans and guarantees to at least £44bn over the next five years.
However, IMLA’s Williams was less than impressed. “A solution to the housing crisis was widely expected to be the main event in the chancellor’s Budget, yet the measures announced lacked the scale of ambition to really solve our housing problems,” he said.
“The political resolution to improve prospects for aspiring homeowners that has seen stamp duty abolished for the majority of first time buyers will be welcomed by many but in practice it may simply inflate house prices even further,” he continued.
Indeed, the Office for Budget Responsibility (OBR) has warned that the stamp duty cut is likely to inflate property prices and mainly benefit those who already own homes.
“The reasons for this are twofold,” continued Williams, “firstly, sellers are likely to take advantage of the buyer’s newfound purchasing power and seek to capture higher prices than they might otherwise achieve. Secondly, as we know from previous changes, we will see some price distortion among properties around the £300,000 threshold (£500,000 in London), where demand will be at its highest.”
“Ultimately, there is a real risk that we will see a stoking up on the demand side at a time when there is already a severe imbalance in supply,” he added.
What about supply?
Although Williams acknowledged that the government is “working hard” to boost supply, and is “making progress”, he also noted that the 300,000 more homes promise has slipped out to the mid-2020s and was based on net additions rather than newly built homes.
“It is encouraging to see recognition of the need for a diversity of supply, including local authorities, and to see more focus on land holdings and garden towns. It was also a relief to see no more punitive taxation for landlords, though we note the planned consultation on longer term tenancies,” he said.
In an effort to address the supply shortage, the chancellor also announced an “urgent” land bank review to examine the “significant gap” between the number of planning permissions granted and the number of homes built.
Yet, despite pledges for more investment and regulatory shifts, Williams argues that the Budget just was not bold enough: “Summing up, an underwhelming sense of déjà vu remains. In every Budget new housebuilding pledges are made, yet supply remains too low and prices unobtainable.
Williams added: “When it comes to the success of the housing aspects of Hammond’s latest Budget, the devil will be in the detail and in moving forward at speed. The clock is ticking ever louder.”
Specialist lending: avoiding boom and bust
According to IMLA the potential is high. It says specialist residential lending, focused on borrowers who fall outside mainstream lenders’ criteria, was only £3bn last year. Mainstream banks show no appetite for moving into specialist sectors and higher capital requirements mean the market has more stability.
“Specialist lenders are more conservative than in the past, and bound by tighter regulation such as increased capital requirements making them less vulnerable in a downturn. Furthermore, the market is bigger than ever, so these lenders have been able to grow and fill underserved areas,” says IMLA executive director Peter Williams.
Masthaven MD for mortgages Matt Andrews agrees, pointing to the rising levels of self-employed or contracting borrowers, who fall outside the factory underwriting of the mainstream lenders.
“Self-employment and contracting are growing. Economic pressure on companies means that is likely to continue to allow flexibility of resource. Specialist lenders build themselves to understand specific customer groups and have the infrastructure for that. Specialists will always win because we specialise.”
He adds that near-prime customers who have suffered a credit blip because of personal circumstances such as bereavement or unemployment are another growth segment. “County Court Judgments are at their highest ever and that’s going to ripple through,” he notes.
Mainstream banks retrench
Andrews says the sector has been significantly limited by lender undersupply in the past but the number of lenders offering these products has grown significantly, especially with the advent of challenger banks.
In times of economic uncertainty, he adds, mainstream banks retrench and will avoid customers who have more complicated and time-consuming needs.
Richard Tugwell, group intermediary relationship director at Together, says with mainstream criteria becoming increasingly rigid, many customers are turning to niche lenders.
“The self-employed, high-net-worth individuals with complex income streams, those looking for interest-only mortgages, those with unusual property types, or looking for mortgages for right-to-buy or shared ownership, and those who have recently moved jobs, for example, are just some of the types of customers that may struggle to obtain mainstream finance, but are well-served by the specialist lending market,” he says.
“As a result, demand for specialist finance looks set to continue growing, despite any wider economic issues.
“In many ways the specialist market acts as a complement to the mainstream, and ensures that customers have a choice. I think the challenge for the specialist market is ensuring more consumers are aware of this offering and that’s something that lenders and brokers need to work together on.”
Andrews says the fact that the lending differs from mainstream does not mean the specialist sector is on shaky ground, rather that it is set up to cater to complexity. “Specialist lending and underwriting does not mean irresponsible or poor quality,” he says.
And the focus on affordability means reports of over-indebtedness rising are not a threat to the market. “We make sure affordability calculations work effectively and deploy all the appropriate stresses under the mortgage Market review (MMR). We are rigorous on affordability,” he says.
Dale Jannels, managing director of broker, packager and distributor AToM, agrees. “It’s not a fly by night sector,” he says.
AToM has dealt in specialist lending since 1996, through the financial crash. “We lost all of the securitisation lenders, but that possibly was a good thing as at certain points, we could almost do any mortgage,” says Jannels.
“It is more regulated now and affordability is the key to everything, so it should be less volatile. That’s also on the assumption we’re not so reliant on the securitisation markets….which are now also creeping back in, as new lenders enter the specialist arena.”
High street influx
Jannels suspects that the high street lenders will venture into the area in some capacity when volumes don’t reach the targets required. “But they will never have the flexibility to think outside the box as some of the smaller building societies [and others] can currently.”
A number of the larger lenders also have legacy systems, which are costly or impossible to bring in to the specialist arena requirements.
Liz Syms, CEO of Connect for Intermediaries, says there is plenty of room for growth in the specialist market. “We are in a much tighter regulated environment than we were before the credit crunch, and according to IMLA there are still a large number of unmet needs of clients, giving lenders lots of scope to innovate without inadvertently causing issues in the market.”
She says it is unlikely that mainstream lenders will seek to cannibalise the specialist market as their systems aim to minimise the need for complex underwriting undertaken by specialists and they are more likely to tweak rates than criteria.
“Specialist lenders find changing criteria easier to do than mainstream lenders because changing criteria and making it fit for submission on the legacy systems that most mainstream lenders have can take a very long time,” she says.
While consumer over-indebtedness applies to the unsecured sector rather than secured loans, Syms says this is an area lenders must keep tabs on.
“Any escalation of an individual’s overall debt levels has to be of concern to every lender, specialist and mainstream, as it affects a borrower’s ability to pay back all loans. However both the regulator and the Bank of England are turning their attention to this, so I believe that we will start to see more measures put in place to keep it under control,” she says.
AToM’s Jannels believes over-indebtness is an issue. “We see first-time buyers leaving university with upwards of £30,000 in student loans, and having been able to get a brand new car for £199 per month (another debt of £12,000-15,000),” he says.
“So already they’re looking at £42,000+ debt before they start. Everything is interest free, buy now pay later or HP and this is a spiral that’s absolutely going to get worse. Add in a generation of mortgagees who have never had a rate rise and yes, people are living on the breadline. Any rate rise, no matter how small, will have a significant impact.”
IMLA says the sector is prepared. “Clearly it is an important factor, one that cannot be ignored – not least with the rise of second mortgages,” says Williams.
“Lenders are aware of the pressures and as such, rigorous income and expenditure assessment and credit checks as part of the mortgage process ensure that they are taking a close look at borrowers’ overall debts and outgoings.
“While there is a risk of borrowers subsequently increasing other debts, aggregate figures on consumer debt show this is still much lower relative to incomes than before the financial crisis.”
High broker confidence could be required in cooling economy – IMLA
According to the tracker, nearly nine out of every 10 (88%) mortgage applications submitted via intermediaries led to offers in Q2 – up 13 percentage points on the same quarter a year earlier.
This is the highest rate of offers since the Tracker started at the beginning of 2016, despite an uncertain political and economic backdrop.
First-time buyers were also more successful in Q2; 88% of their applications led to an offer, up from 71% in Q2 2016.
This continued growth in successful applications is a testament to the intermediary channel’s ability to match consumers with products in a complicated and competitive marketplace.
Borrowers’ applications are subject to a number of regulatory hurdles, and while various layers of regulation have built a healthy and sustainable market, it can make obtaining a mortgage more challenging.
The tracker also revealed a pervading sense of optimism among brokers themselves.
When asked, 96% said they were optimistic about the mortgage market’s future.
On top of this, 97% of brokers said they were confident in the outlook for the intermediary sector, and a further 97% said they were confident in the outlook for their own firms.
It would therefore appear then that the snap general election, hung parliament and ongoing Brexit-gloom failed to diminish borrowers’ and lenders’ appetites, or dampen brokers’ positivity.
Data from UK Finance confirms that there was solid growth in Q2, with gross lending totalling 6% more than Q2 2016.
Robust foundations and high levels of confidence might serve the market well in coming months; Nationwide’s suggestion that house price growth is tapering and the economy is cooling off indicates that it may not be all plain sailing from here.
App to completion rates rise for FTBs and specialist deals – IMLA
A report from the Intermediary Mortgage Lenders Association (IMLA) found that the application to completion conversion rate of first-time buyer deals had risen by 19 percentage points from 48% of first-time applicants seen in Q1 2016, to 67% during the first three months of this year.
The positive trend continued among specialist mortgage borrowers, which includes applicants with adverse credit, equity release deals, and self-build projects. Last year, 56% of applications received during Q1 resulted in completion. By Q1 this year, the conversion rate had reached 67%, a rise of 11%.
The rate of mortgage applications resulting in completions across the intermediary channel reached 69% in Q1 2017 which is the highest level since the tracker was launched in Q1 2016.
Peter Williams, executive director of IMLA, said: “Low mortgage rates have contributed to this improving outlook for first-time mortgage borrowers. However, with the Bank of England reporting that average rates are creeping up on the higher loan-to-value products that buyers with modest deposits rely on, policymakers must continue to do their utmost to support lending to this part of the market.”
The tracker reveals that, despite affordability pressures, prospective first-time buyers are making more enquiries and applications than they were a year ago. The average number of enquiries received by intermediaries serving this segment of the market rose from 55 in Q1 2016 to 60 in Q1 2017. The proportion of enquiries leading to applications in principle also increased from 51% to 57%.
In the specialist mortgage market, the average number of enquiries received by intermediaries increased by 9 from 48 in Q4 2016 to 57 in Q1 2017.
Remortgaging was the only other market segment which saw more consumer enquiries during the first quarter of 2017 than the final quarter of 2016.
The average number of buy-to-let enquiries received by intermediaries increased by 5 from 52 in Q1 2016 to 57 in Q1 2017, while the rate of applications resulting in completions rose by eight percentage points from 60% to 68%.
Regulatory changes which have increased the complexity of the buy-to-let mortgage market, are driving growing numbers of borrowers towards the intermediary channel as they seek to reassess their portfolios and investment strategies.
Williams added: “The improving ratio of enquiries and applications to mortgage completions over the last year is a testament to the success of the intermediary channel in matching consumers with suitable products in a complicated and competitive marketplace.
In Q1 2017, 99% of intermediaries reported they were confident in the outlook for their business, with a further 64% reporting they were very confident.”
“The intermediary channel is well placed to deal with the needs of the growing number of borrowers with non-standard circumstances, which is reflected in intermediaries’ high levels of confidence.
Mortgage industry implores government to support SME housebuilders
Research from the Intermediary Mortgage Lenders Association (IMLA) found that 61% of lenders and 57% of brokers believe government support for development finance would improve the lack of housing supply.
In the run-up to the general election, IMLA is urging policymakers to support lending to small and medium-sized housebuilders. It follows the organisation’s criticism of February’s Housing White Paper for outlining the issues but failing to offer solutions.
Data from the Department of Communities and Local Government reveals that new house completions were down 1% in the year to December 2016 compared to the previous twelve months.
Peter Williams, IMLA’s executive director, said: “IMLA’s research reveals that the mortgage industry clearly feels that supporting development finance lending to SME builders and developers would help increase in housing output.
“Successive governments have struggled to meet housebuilding targets, and the lack of solutions offered by the incumbent government in its Housing White Paper shows there is a need for new ideas. IMLA is therefore calling on policymakers to explore how they can boost development finance lending.”
Williams added that there are several ways this can be achieved, from promoting development finance, to guaranteeing loans to SME builders.
IMLA’s research among lenders found that they view a higher risk of builder default as the biggest challenge when it comes to providing development finance, with 44% of lenders identifying this as a key problem. This is followed by a lack of builder appetite for traditional models of debt due to a preference for mezzanine finance, which 35% of lenders identified as a key issue.
“By launching a guarantee scheme, or boosting lending to developers via the British Business Bank, policymakers could increase the flow of development finance and improve output in the sector,” said Williams.
IMLA – We are in the golden age of the broker market
Speaking at the MyHomeMove conference, IMLA executive director Peter Williams also noted that while the housing market looked stable for the next two years, after that “all bets were off”.
He added that government policy had been so one-eyed that there needed to be a redressing of the balance between housing as an investment and as a place to live.
“Government doesn’t speak about that because they are trapped rather in terms of where they go and there is also a silence partly because the issue is all about tax,” he added.
On technology, Williams said: “The way that the world is changing in automated processes, you could argue that we are in the golden period of the broker-led intermediary mortgage market.
“This is a period in which, after a while, we may begin to see the digital impacts coming through in terms of how some of those processes will be automated and indeed changed.”
Williams also warned that while the current situation was largely stable, it was a market which was at risk from external economic and political pressures.
IMLA criticises government policy for failing to tackle widening housing divide
It came as the body published figures showing that almost 42% of all funds spent on residential property in 2016 were cash – a post-recession high and up 12% on the previous year.
The growth noticeably outstripped the increase in mortgage lending and threatens to deepen social divisions in the UK housing market, IMLA warned.
It criticised the Conservative’s Housing White Paper for not focusing enough on increasing housing supply to tackle the problem.
According to IMLA data, £109bn of cash (including the proceeds of existing property sales) was spent in the residential purchases market total of £261bn in 2016.
IMLA said that while lending was up 5% from 2015 and 32% since 2013, the total sum of cash injected into residential property rose significantly faster: 12% year-on-year and 57% over three years.
Growth of £6.8bn in house purchase mortgage lending from 2015 to 2016 was overshadowed by the extra £11.8bn in cash contributions.
Reduced mortgage share
This was the highest cash contribution of the post-credit crunch years, reducing the role of mortgages in funding house purchases even though total lending grew each year from 2013 to 2016
IMLA added: “The growing influence of cash in the house purchase market has potentially negative implications for aspiring homeowners and home-movers who cannot stump up enough funds to add to a mortgage which their salary can support in order to afford a property purchase.”
IMLA executive director Peter Williams warned that “rising house prices and stagnant incomes mean that access to wealth as well as mortgage finance will increasingly separate the haves from the have nots in the property market if the importance of cash continues to grow.
“The recent Housing White Paper was a missed opportunity to take strong action on housing supply, and we must hope that the upcoming election manifestos will be used as an opportunity to put that right,” he added.
There was some encouragement where lending was concerned, as IMLA’s fourth annual New Normal report pointed out that three-quarters of the annual growth in house purchase lending came from first-time buyers in 2016, as the number of home-movers fell back.
At the same time, buyer affordability – measured by the proportion of income that the typical home buyer spends on mortgage interest – improved to record levels for those who were able to secure a mortgage thanks to unprecedented low rates.
Williams continued: “The backdrop of a broken housing market is putting growing pressure on lenders to innovate in terms of product design at a time when they have been operating within increasingly tightening regulatory boundaries.
“We are seeing a number of flexible products come to market to help make home-buying more accessible, for example using family guarantors, but there are limits to which flexible lending solutions can compensate for continuing structural flaws in the housing market with all the social implications that entails.
“The shift towards cash is partly a consequence of trying to manage housing demand by restricting mortgage supply, with Financial Policy Committee (FPC) actions in 2014 quickly layered on top of the Mortgage Market Review (MMR) affordability rules. With the market having cooled and interest rate expectations shifted since then, there is a legitimate case for asking whether current restrictions on lending are still appropriate or have become over-zealous,” he added.
IMLA appoints first female executive director
In January, Mortgage Solutions revealed Williams’ intention to step down by the end of this year.
Davies will be the first woman to be executive director and will shadow Williams from 1 June before formally taking over on 1 January.
Davies brings almost 30 years’ mortgage experience to the role, having served as a senior policy adviser at the Council of Mortgage Lenders (CML) and Building Societies Association (BSA).
She has also served as a non-executive director at Darlington Building Society, as standards officer for the Equity Release Council and was appointed chairperson of the Property Codes Compliance Board.
Her primary responsibilities will be to oversee IMLA’s operations and strategic direction, including coordinating member dialogue and initiatives on market and policy issues, relationship building, research and engagement with industry partners.
IMLA chairman Kevin Purvey said the organisation was excited to bring in Davies as an experienced, high-profile policy specialist who was widely respected for her work in the UK and European mortgage sectors.
“As well as her comprehensive knowledge and expertise on market and regulatory issues, Kate is also very familiar with the challenges faced by trade bodies and the invaluable contributions they make to support the market and the consumers it serves,” he said.
“Her experience and skills make her a perfect candidate to build on Peter Williams’ contribution to IMLA and help to steer the organisation through an important period in its development, as a dedicated and democratic forum for a wide range of lenders to collaborate for the benefit of all concerned.”
Davies added that she was delighted to be joining IMLA.
“The role provides a fantastic opportunity to contribute to the most important industry and policy debates affecting the mortgage market, and work closely with IMLA’s fellow trade bodies, regulators and policy makers to help secure improvements to the operating environment,” she said.
“IMLA’s growing membership speaks volumes for the value that lenders see in working together to help inform this agenda, and I look forward to building on the invaluable work done by Peter Williams to grow IMLA’s profile and influence.”
Brokers report doubling of mortgage availability – IMLA
However more than two thirds (70%) of intermediaries still reported problems obtaining a mortgage for some of their clients.
Brokers and lenders both believed the remortgage market had the best prospects for growth in 2017 – although Bank of England figures last week suggested this could be a rocky time for the sector.
Two thirds of brokers (65%) saw limited company buy-to-let lending as the area with greatest mortgage availability growth potential.
However, the vast majority of lenders said there was more likely to be more finance available for borrowing-into-retirement over the rest of the year.
Conditions were most improved for borrowers who sit outside the mainstream mortgage market.
Brokers reported the biggest improvement in sourcing mortgages was for interest-only borrowers – a 23 percentage point fall in the number reporting problems in the sector.
This was closely followed by lending into retirement and borrowers who were self-employed or had irregular incomes – both down by 21 percentage points.
The Intermediary Mortgage Lenders Association (IMLA), which conducted the research, said brokers were encountering fewer difficulties sourcing mortgages for clients than at any point since the introduction of the Mortgage Market Review (MMR) in April 2014.
It noted that the 30% of brokers (up from 15%) having no problem sourcing a mortgage for any type of client was a clear reflection of improving lending conditions.
Regulation and affordability
IMLA executive director Peter Williams said the figures were hugely encouraging given the regulatory changes and housing affordability.
“Over the past few years, regulations like the MMR have raised the bar in terms of borrowers’ requirements, which some predicted would leave many borrowers locked out of the market,” he said.
“House prices have been growing faster than incomes over the past few years, which has challenged affordability. This issue has been particularly acute among first-time buyers, which means the fact that just 16% of brokers reported they were unable to source a mortgage for someone in this group over the six months is very positive news.
“Low mortgage rates have continued to support borrowers’ affordability by reducing monthly payments,” he added.
Williams added that he was not surprised the remortgage market was seen as the most significant to increase over the year.