Adverse credit tops August broker ‘tricky case’ list
Primis Mortgage Network helped advisers with 1,903 queries in August, with the most common query around adverse credit.
The network said that this was partially due to more mortgage options becoming available to those with adverse credit, which could include missed payments, debt management plans, county court judgements or bankruptcy.
It said this showed an increase in lender confidence as pandemic recovery continued.
According to Primis, it is the first time since February this year that adverse credit appeared as a leading query.
Chris Sykes, Private Finance’s associate director and mortgage consultant, said: “It would make sense after the last 18 months that there is more adverse credit in the market.
“This is something we predicted at the start of the pandemic and we feel more lenders need to be understanding and manual with small blips rather than offering a mainstream automatic decline model, where explanations are often not listened to.”
Pepper Money’s sales director Paul Adams said that it was “no surprise” to see an increase in adverse credit enquiries given the upheaval of the last year and a half.
He pointed to the Pepper Money’s adverse credit study which found that 36 per cent had seen a fall in income during the pandemic and 24 per cent had increased their credit use.
Self-employed mortgages also ranked in the top four most common broker queries in August, with Primis attributing this to changing lender criteria and new products.
Craig Scott, mortgage broker at Specialist Mortgages, said that he had seen lenders loosening criteria when it came to government support, with many now putting in a time scale on when it was used to improve flexibility.
However, he said that often the loan to value was still a “great source of frustration” as they were typically lower, and lenders did not have a timeframe as to when this might change.
He added that in some cases it may be challenging for company directors to secure mortgages as their income might be complex and require more underwriting and service.
Sykes said: “It is such a complex market really you need a broker if you are self-employed, we are navigating explanations around grants, loans, talking lenders through how businesses have changed during the pandemic. It is a tough market still, but it is improving daily as lenders get more understanding of Covid-19 impacts.”
Later life lending
Brokers also submitted a lot of queries around later life lending, especially around gifted deposits where parents help their children purchase property.
Primis added that there had been an increased number of guarantor mortgage and joint mortgage sole proprietor enquiries.
Sykes said that Private Finance has seen a “fair rise” in these kinds of enquiries but it was “tough and often a specialist market”.
He said: “These are always difficult as expectations versus reality can be quite different in this bracket, for example I had a client who recently retired earlier than planned from a corporate job on well over £100,ooo.
“He needs to review his mortgage but doesn’t have a pension yet so is just living off investments. Luckily we have lenders that can take an asset slice view on his investments until his pension kicks in.”
Expat BTL enquiries
Another common query was around expat BTL enquiries, but Primis warned that there were fears lenders may not lend to expats following Brexit.
Scott said that expat BTL mortgages were still popular, especially with a limited company structure due to the tax savings.
He added that many foreign investors still saw London and the South East as key areas in which to purchase and invest in property.
Primis’s value could be ‘arguably more than smaller peer’ MAB
MAB’s market capitalisation was £698.7m today.
The valuation of Primis came as merger and acquisition activity is heating up in mortgage broking, which is seen as a fragmented market ripe for consolidation.
Trussle was acquired by US lender Better this month, while Foxtons is “reviewing strategic options” for its broking business Alexander Hall.
The research was produced by Zeus Capital, which was appointed as joint broker by Primis’s parent company LSL Property Services in November 2020.
Its note ranked Mortgage Advice Bureau (MAB) as a “smaller peer” compared to Primis.
The possible valuation range was based on size, with Primis having 2,681 advisers compared to MAB’s 1,694.
As well, LSL’s mortgage completions reached £32.6bn in the year to 31 December 2020. MAB’s completions were £17.6bn that year.
The valuation comes after a new strategy was brought into play by David Stewart, who joined LSL as group chief executive on 1 May 2020.
Stewart, who was formerly chief executive at Coventry Building Society from 2006 to 2014, has set a target for the financial services segment of LSL to become the group’s largest profit contributor by 2023.
It contributed 30 per cent to the group’s underlying operating profit in 2020. Surveying contributed 40 per cent, and estate agency services 30 per cent.
On 21 April, LSL announced a joint venture with investors Pollen Street Capital, with funds of £200m to create Pivotal Growth, a vehicle “to buy and build a major UK mortgage broking business”.
Potentially, this could provide a route for owners of firms within the Primis network who may be looking to exit.
LSL sells stake in LMS to focus on financial services strategy
ONP Group is a UK private equity firm that consists of O’Neill Patient Solicitors, Cavendish Legal Group, Grindeys Conveyancing and Conveyancing Alliance.
LSL said the capital from the sale will used to accelerate the group’s growth strategy which has a big focus on financial services.
In a notice to the London Stock Exchange, LSL said the sale followed “significant progress developing and executing a clear financial services led growth strategy”.
LMS chief executive Nick Chadbourne (pictured) said: “This investment from ONP Group represents a real vote of confidence in our ambitions to continue to lead and advance the market as an independent provider of conveyancing panel management services.
“ONP Group share our belief that technological innovation will provide the means to speed up and simplify conveyancing, and today’s news provides a real validation for the LMS team’s hard work and dedication to evolving this business in recent years.
“In buying LSL’s 50 per cent stake in LMS, we have a new dynamic to the shareholder mix with exciting times ahead. The whole team are looking forward to working with our new 50/50 joint venture partner alongside long-time shareholder, Connells Group.”
Focus on financial services
In April, Simon Embley announced he would step down as chairman to become the chief executive of a new mortgage advice firm Pivotal Growth, the result of a £200m joint venture between LSL and investors Pollen Street Capital.
At the time of the announcement, LSL said this investment in Pivotal Growth would enable the brokerage to acquire other mortgage firms which will be expected to join the Primis network, also part of the LSL group.
LSL has committed up to £33.5m and Pollen Street Capital up to £62.4m to support acquisitions. This will be supplemented by external debt finance in Pivotal Growth, with a view to an exit over three to six years.
LSL and Pollen Street Capital’s investments of £19.1m each will give them a 47.8 per cent equity share of Pivotal Growth.
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Beyond these broker challengers, technology advances caught reader’s attention as new integrations and partnerships promised more seamless workflows. The rush of lenders returning to, or enhancing, their high loan to value (LTV) lending continued.
Meanwhile, the regulator ruffled feathers in setting out the latest fees to cover the cost of its compensation scheme.
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Opportunities rife for advisers promoting advice on furlough and the self-employed – Kensington
Opportunities rife for advisers promoting advice on furlough and the self-employed – Kensington
In this exclusive video for Mortgage Solutions: High Street versus mainstream, our panel including Craig MacKinlay, new business director at Kensington Mortgages, Vikki Jefferies, proposition director at Primis Mortgage Network and Greg Cunnington, director of lender relationships and new homes, Alexander Hall debate the business drivers brokers could capitalise on this year.
Sponsored by Kensington Mortgages, McKinlay said as we come out of a recession, self-employment typically rises and at 15 per cent now, this will only increase.
“Work hard in this sector to get a good reputation and get out on social media and promote your skills on self-employed cases, said McKinlay.
Jefferies agreed, adding that infiltrating group and sector discussion forums like those of the IT sector is also a great way to work up a referral model, for example, groups debating the best way to tackle the IR35 tax status changes.
“I’m not saying brokers need to be tax experts, but if people are talking about something relevant to a sector like IR35, they will need mortgage advice, so don’t be afraid to ask for those referrals,” said Jefferies.
Self-employed as an obstacle
Cunnington said a lot of the self-employed cases that would have been waved through before the pandemic as vanilla are attracting more scrutiny now.
“We are seeing a lot of clients who think they won’t be able to get a mortgage or remortgage after all the negative stories about self-employed mortgages in the national press. But actually, if you talk to specialist lenders there are plenty of success stories out there,” he added.
It’s important that brokers promote their successes on social media and through case studies on the website to encourage this kind of personal referral activity, he said.
Watch the debate unfold below for more on the wins from manual underwriting, what brokers want from a business development manager (BDM) and Kensington’s moves into the Northern Irish market and its onward strategic lending plans.
Primis bosses heap criticism on FCA and FSCS fee blows and call for industry unity
“The sad reality of this is that these FSCS and FCA fees mean it costs more money to run a network and that will come down to all stakeholders in that network model at some point. Sadly, it might even hit consumers depending on the way the fee is restructured in future years with no end in sight.”
Jon Round, group financial services director, added: “This is just really, really bad business practice for us not to know the fees until half-way through the year.”
It’s hard to run a business with the level of fitness, properness and financial propriety expected with partial knowledge on the incoming fees, he added.
“This is not an insignificant amount of money. It contradicts the obligation to run your business on a sound financial footing,” he added.
Smith (pictured) said: “This is hitting the whole intermediary space. If you’re an Appointed Representative (AR), you’re part of a network, so we have some options in terms of how we charge this. If you’re a directly authorised firm (DA) you’ve got to pay this and you’ve got to pay all the fees up front.”
“We all represent our intermediaries who look after the end customer and this is the time to put down any competitive differences that you’ve got and stand together.”
Primis called for the industry to collaborate and work with the Association of Mortgage Intermediaries (AMI) which hit out immediately after the CP21/8 paper landed in April, which offered a five week consultation period.
AMI chief executive Robert Sinclair criticised both the regulator’s approach to getting networks in line and the huge FCA fee uplift expected to raise in the region of £10m with exact figures expected to be confirmed in July or August this year.
Against a backdrop of rising Professional Indemnity (PI) insurance costs, the industry is already reeling from a £17m hit from the Financial Services Compensation Scheme, confirmed in November last year, to pay for the scale of poor practice in general insurance, pensions and the investment sectors.
The FCA has already warned mortgage advice firms and networks growing their adviser bases to increase their compliance functions to match their rising numbers.
In October 2020, the Financial Conduct Authority (FCA) said it will be contacting firms and networks which have grown rapidly to ensure they were still maintaining sufficient oversight. It also continues to examine firms which have multiple trading names to ensure they are not illegally offering regulated advice from unregulated organisations.
Regulator admits structure wrong
When the fees consultation paper emerged on 20 April, the Financial Conduct Authority (FCA) admitted the current funding system ‘isn’t suitable’ and that it was proactively tackling rising regulatory costs by sharpening its teeth as a watch dog.
It said its increased focus on firms operating below standard will include a firmer approach to those applying for authorisation and making better use of data and intelligence to identify harm caused by authorised firms.
“We also want to work towards a system where firms which cause redress liabilities end up paying more of the bill before recourse is needed to the FSCS,” the FCA continued.
“This would be fairer and would further incentivise firms to achieve good outcomes for consumers. It would benefit firms of all sizes.”
Contractor and furlough mortgages hot topics as Primis desk sees record call numbers
The product desk received 2,823 calls last month compared to an average of 2,083 broker queries a month in 2020.
The most common questions from brokers involved lending for contractors, furloughed borrowers, buy-to-let purchases for first-time buyers and non-homeowners, as well as product options for regulated and limited company buy-to-let investors.
The pandemic has continued to affect the rate of mortgage applications. In January, Primis reported an 18 per cent rise in adviser enquiries relating to poor credit, income protection and furloughed income.
Last month, the nature of enquiries were slightly different with a bigger focus on the self-employed as well as borrowers on full or partial furlough. Furthermore, brokers have seen a spike in mortgage queries from first-time landlords.
Vikki Jefferies, (pictured), proposition director at Primis, said: “Today’s figures show just how crucial Primis’ product desk is, not only for supporting brokers with client queries, but also educating them on key themes in the mortgage market so they can grow their confidence in these areas.
“It is really encouraging to see that advisers were using the product desk throughout March to support them with both new and ongoing queries, and then showcasing their learnings in conversations with clients.
“Ensuring that operational processes are running efficiently will deliver significant benefits for brokers’ businesses, so I’d encourage the adviser community to take advantage of the resources available to enhance their business and support their client work going forwards.”
Primis product desk sees January enquiries spike 18 per cent
In a snapshot offering insight into the cases its Appointed Representatives (ARs) are finding hard to place, the network said its desk resolved 2,462 inbound calls; a record last month.
Between March and December 2020, the desk supported brokers with 18,746 queries in total, while throughout 2020, it resolved 23,777 queries from advisers.
The calls clearly focused on the fallout of the Coronavirus crisis as advisers also battle to beat pressure from the stamp duty land tax (SDLT) holiday deadline which ends on 31 March. The network confirmed cases involving second or holiday homes with a view to completion before the SDLT deadline were another popular enquiry.
Primis has also seen Right to Buy enquiries and income protection involving multiple and complex medical conditions in addition to complex income types.
The network said its product desk aims to address queries from advisers within four hours and is currently operating an email and call back-only service on all product sectors while Covid-19 restrictions remain in place.
Vikki Jefferies (pictured), proposition director at Primis, said: “January marked a strong start to the year for our product desk team, with a record number of queries from brokers coming in as this community looked for additional support to help them with client cases. Investing in our adviser members has continued to be a priority for us during the Covid-19 pandemic.”
On furloughed borrowers, Jefferies said lender appetite for these borrowers completely varies across the market.
“Lenders remain cautious about what will happen to sectors such as hospitality and retail from April onwards. Their main aim is to see what will happen to the market once government support schemes such as furlough end.”
She added that specialist lenders have a much better understanding of schemes like the Self-Employment Income Support Scheme (SEISS).
“Compared to where we were in the early autumn, we are seeing more considered decisions from underwriters at specialist lenders when assessing self-employed borrowers. However, the most recent development has been that many specialist lenders are unable to support borrowers who have taken an SEISS grant as recently as January.”
On the day the scheme was due to end, the government announced plans to extend the furlough scheme through to April this year, with an estimated 9.9m people registered in December and claiming 80 per cent of their income up to the cap of £2,500. The government has so far spent £46.5bn to December 2020 on furloughing workers in a bid to protect jobs.
According to Office of National Statistic (ONS) figures, UK unemployment figures were at five per cent to November-end, but are projected to rise to 7.5 per cent or 2.6m by mid-2021. The Bank of England estimates unemployment could rise to 10 per cent this year.
With hotels, restaurants, shops and entertainment industries the worst hit so far during the pandemic, 395,000 people were made redundant in the three months to November.
Primis expands into equity release market with lender panel
The network said the panel will be representative of the whole of the market and lender additions would be announced in due course.
It has also been training support staff to assist brokers in completing equity release cases.
Vikki Jefferies (pictured), proposition director at Primis, said one of the firm’s key focuses has been enhancing its later life lending proposition to ensure a greater number of advisers can better support their clients in this area.
“This includes equipping our support staff with the necessary knowledge and tools to help them in their conversations with advisers, and ensuring the necessary processes are in place to help us best fulfil the needs of borrowers,” she said.
“To this end, it is fantastic to be able to announce that Primis has launched in the lifetime mortgage space.
“As we grow the panel over the coming months, the robust supervision of advisers, adherence to strong processes and honing the expertise of our intermediary partners and support staff will continue to be priorities for us.”
She added that maintaining and cultivating strong relationships with equity release providers will also be a key goal so that brokers were in a strong position to support clients throughout their later life.
Primis is a member of the Equity Release Council (ERC) having qualified for full membership in 2019 and has already been supporting later life lending through retirement interest-only lenders.
The equity release advice market has been the subject of much scrutiny from the Financial Conduct Authority (FCA) over the last year with further investigations to take place.
In response the ERC has issued guidance for firms in advice processes while Association of Mortgage Intermediaries (AMI) chief executive Robert Sinclair warned the sector not to take the issue lightly.
Brokers need most support with availability of high LTV and self-employed deals – Primis
The network received 2,186 contacts from advisers, up from the monthly pre-pandemic average of 1,800.
The majority of questions were around high LTV deals and which lenders were operating in the market.
The team also received a high number of queries from brokers with self-employed clients who were keen to understand how their income would be treated by lenders.
Consideration of government support measures, such as mortgage payment holidays, in applications was also a key issue.
The product desk has supported brokers with 12,364 queries between March and September, marking a 14 per cent increase in the number of enquiries the team would usually receive in any given six-month period.
Vikki Jefferies, proposition director at Primis (pictured), said: “We recognise the importance of supporting and investing in our advisers so they can provide customers with the best possible outcomes – particularly at this time.
“This is demonstrated by today’s figures, reflecting the work of our highly skilled product desk team in assisting brokers as the Covid-19 crisis continues to impact advisers’ business.”