‘Sub-one per cent deals are great for borrowers’ – Star Letter 27/08/2021
This week’s comment was in response to our Star Letter last week, where Lankydes said sub-one per cent deals were “utter stupidity”.
Positivethinker17 said: “[With] fractional reserve banking there’s never really been any value to the money.
“[There is] nothing new here and sub-one per cent deals are great for borrowers.”.
Sub-one per cent deals are a sign of ‘utter stupidity’ – Star Letter 20/08/2021
This week’s first comment comes from LankyDes in response to the news that Yorkshire Building Society was bringing out sub-one per cent mortgages up to 75 per cent loan to value (LTV).
He said: “[This is] evidence of an economy gone wrong for 40 years. Utter stupidity these rates, there is no value in the money used to lend any more. Only asset prices matter as the rich know – with their six country houses – that even they might not be safe if [the] money to buy them loses its value.
“Money put into assets like that has been sucked out of the real economy and will stay out forever. Please don’t give me the politics of envy. I envy nobody on Earth. Indeed, I pity people who have such a desire for wealth.”
Stephen Barry also had a view on the low-rate market, as he reacted to the news that TSB was adding a 0.84 per cent deal to its range.
Barry pointed out the discrepancy between these low rate deals, often offered to borrowers with 25-40 per cent equity in their homes and older homeowners who tended to have more equity but were paying higher rates.
He said: “With the latest mortgage deals of less than one per cent with an LTV of 75 per cent it would be interesting to note why the retirement equity release mortgage sector is still on average three times more than that.
“Most clients seeking to release some equity to subsidise their state pension or repay their end of term interest-only mortgages have on average 66 per cent equity.”
The concept of a direct relationship with BDMs is in the past – Star Letter 13/08/2021
This week’s comment came from Spinmeister, in response to the article: Excuses for delays only go so far at this stage of the pandemic – Marketwatch
Spinmeister said: “Some lenders have used Covid to directly reduce service and standards to brokers.
“Some bank’s business development managers (BDMs) are now simply order takers. Any concept of a direct relationship with a BDM able to help you with cases is long past.”
Spinmeister added: “They’ll get their volume, but not any more long-term relationships with brokers wanting to give preferred lenders business due to their service proposition. They’re far too busy to be bothered anymore.”
Anything that gives more access to RIOs is a good thing – Star Letter 06/08/2021
This week’s comment was from Scott Taylor-Barr, in response to the article: RIO affordability barriers solved with life cover, says LiveMore
He said: “This is certainly a great innovation and a sensible way to get more people through the retirement interest-only (RIO) affordability rules.”
Life cover eligibility
“My only initial concern would be how many people could get life cover, given age and potential medical issues, up to age 90 at a cost that is both affordable to them and still allows them to pass the lenders affordability?
“That being said, anything that potentially allows more people to access RIOs is a good thing. I hope it catches on and I hope that life companies take note and move to help too.”
You can cut corners with PTs but it is all about doing the right thing – Star Letter 16/07/2021
The first comment was a response to this week’s Marketwatch piece which asked a range of brokers whether they expected more product transfers this year.
Paul Barnden said: “I’d like to think that it isn’t a key difference with Just Mortgages in that they carry out a detailed review. Surely this is what every broker should be doing, if not they are betraying the trust of their clients.
“I am a sole adviser practice and feel privileged to have the trust of my clients. Whether it is a new purchase, remortgage or product transfer, for both buy-to-let and residential mortgages, I follow the same process to ensure that I am providing to the best of my ability a comprehensive service to my clients.”
Barnden added that he recently had a client who had spotted a five-year fixed product transfer with Virgin Money, but after going through a check, Barnden found a more competitive remortgage product with Santander which that saved the client around £50 per month.
He added: “If I had chosen to cut corners, he would have been none the wiser and I could have earnt more from the Virgin Money product transfer than the Santander remortgage, but it is all about doing the right thing.”
“I have no doubt that the majority of brokers would have done exactly the same but as John Phillips may be alluding to, I believe there could be some advisers who chose to earn the quick buck provided by a product transfer and should this be the case this is not a good outcome.”
He concluded: “That said, product transfers will always have their place and for those whose circumstances have changed, potentially making them unmortgageable, they offer a much needed financial lifeline.”
Self-employed borrowing potential ‘hindered on massive scale’
The second comment was to the news that Natwest would release a new proposition for self-employed borrowers in August.
Paul Smulovitch said: “It is so sad that the self-employed have had their borrowing potential and opportunity to borrow hindered on such a monumental scale when these are the same people that are the backbone to creating business and investment opportunity.”
‘The word broker should be eliminated from our industry’ – Star Letter 02/07/2021
The first comment was a response to our Star Letter last week, which outlined comments on a Marketwatch piece debating whether broker fees should be on a par with solicitors fees.
Rehan Shams said: “I think the word ‘broker’ should be eliminated from our industry and should be replaced with the word ‘adviser’ only.
“I find the word broker demeaning and perhaps therefore some customers perceive that advisers should not be paid as they are just brokers.
“Advisers are actually intelligent people just like the solicitors and customers really need to be made fully aware of this information.”
The second comment was in response to Bank of England research which showed that younger borrowers, first-time buyers and those with low credit scores were more likely to pick expensive mortgages as lenders offered them worse choices.
SOX said: “I’ve always been amazed how mortgage companies are allowed to charge more for perceived higher risk business. It’s the same with sub-prime, the client is either a risk or they are not, they don’t become any less risk just because the lender is charging two per cent more.
“The lender should decide they are either going to lend or they are not, there should not be extra costs, it is exploitation yet it’s gone on for years.”
Clients accept solicitor fees as ‘necessary cost’ but not brokers’ – Star Letter 25/06/2021
This week in a Marketwatch piece, HD Consultants owner Howard Reuben, Rose Capital’s managing director Richard Campo and Darryl Dhoffer, mortgage and protection consultant at The Mortgage Expert debated whether broker fees should be on a par with solicitors fees.
They suggested that due to a higher volume of business and heightened property prices there should be a restructuring of procuration fees, commission, and broker fees to better reflect the increased workload.
Paul Smulovitch said: “The difference here is the perception. Most clients accept a solicitor is a necessary cost and will pay accordingly, however, regarding brokers some clients are aware they can do without or use effective robo-advice so it is being sensible and justifying the charge.”
He added: “However, as most conveyancers charge circa £1,000 for work, as a broker fee this is not unreasonable at all.”
Adam Hosker said: “[It is] your business. Charge what you think works best for your business. If you think broker fees should match solicitors and be based on case complexity, then do it.”
‘The last thing my clients need are seven or 10-year fixed rates’ – Star Letter 18/06/2021
This week, JLM Mortgage Services director Rory Jospeh and head of mortgage finance Sebastian Murphy proposed introducing seven or 10-year fixes into the market to cater for higher loan to value (LTV) borrowers.
They also criticised the market’s moved to launch sub-one percent rates, arguing that they could be the “equivalent of a chocolate teapot”.
John Azopardi said: “The last thing my clients need are seven or 10-year fixed rates. The last person who successfully planned seven years ahead was Joseph wearing a technicoloured dream coat in Egypt.”
He continued: “The reason that these products [seven and 10-year fixed rates] are rarely taken up is that they are over-priced and inflexible. Clients often pay more than on a five-year rate, coupled with the inflexibility of a long early repayment charge (ERC).
“If penalties dropped off or reduced drastically after five years then maybe – and if the rate was slightly over the five-year rate then possibly – but until then I would suspect that very little business is transacted at seven and 10 years.
He added: “More to the point, if the lenders are buying in more lending at sub 60 per cent to improve market share and to ensure that they can do more high loan to income lending above 85 per cent I am all in favour of their stance. That’s a win-win for all my clients and we get the added bonus of news space when we are competing with Euro 2020 and the Delta variant.”
The housing minister ‘is talking nonsense’ on EWS1 form – Star Letter 11/06/2021
This week, cladding guidance form EWS1 and the new regulatory consultation CP21/13, from the Financial Conduct Authority, got readers’ fingers typing.
The claim by housing minister Christopher Pincher that half a million leaseholders would be freed from the requirement to supply an EWS1 form to their mortgage lender was met with incredulity.
Martin31, said: “I am afraid Mr Pincher is talking nonsense. The government’s supposedly independent expert panel caused the utter mess we now have. With Advice Note 14, they effectively asserted they had arbitrarily withdrawn compliance, with building regs as the standard measure of a building reaching an adequate safety standard. The surveyors were then encouraged to design a valuation methodology for lenders and things have gone down hill ever since.
“We are now effectively on the third or fourth iteration of EWS. The insurance companies do not support it and some of the lenders do not agree. The government has twice tried to spin the story that fewer blocks need a survey but so long as any lender says they do want a survey the market is in a mess.
“RICS has also changed its mind on who can carry out a survey and a small proportion of fraudulent surveys have been created. The consolidated government advice published in Jan 2020 scuppered any update to excluding EWS on under-18 metre buildings, as it now says buildings of any height need to be checked.
“So, even if a building is lower than 18 metres and less than 25 per cent clad, it’s still a “building of any height,” so does fall within the government guidance to check.
“The only solution will be for government to take back some form of responsibility for deciding what is and isn’t safe, as has happened in Australia and Scotland. If not, then we will continue to have different assessments from different EWS practitioners and different lenders taking different views with insurance companies still deciding they’re not happy.”
‘We need good regulation’
Meanwhile, the regulator’s call for views on its proposed new Consumer Duty regulation (CP21/13), elicited a robust response.
LankyDes said: “Usual balderdash from the FCA employees who have to justify existence.
“I did my first mortgage in 1983. In those days in the bank I worked for, it was a disciplinary matter if you told someone that the endowment wasn’t guaranteed to repay the mortgage. I told every customer I ever saw. Treat people how you would want to be treated yourself. I was brought up by my parents that your conscience is far more important than your employer’s rules or the regulations of those who can’t do, and probably can’t even teach, but regulate. So I will take no lessons from the FCA in thinking how customers want to be treated.
“In 40 years in the industry, I haven’t gained a single insight from the FCA or its predecessors. I had affordability calculators years before most lenders, and very useful they are. They aren’t God, however, which is what the FCA has influenced lenders to make them.
“I’m not one of these people who condemns regulation or condemns health and safety, etc. We need good regulation but sadly we don’t have it.”
A robust file will protect brokers from the growing ‘sue culture’ – Star Letter 21/05/2021
The first comment was in response to the story: Broker wins case against charge of mis-selling interest-only mortgage
Andy Wilson said: “As always, a robust file will help to protect against losing claims such as these, which are likely to become more and more common whilst we live in a ‘sue culture’.
“It is not enough to give your clients sound advice, you need to be able to prove you gave them sound advice.”
He added: “Converting an interest-only mortgage to a capital and interest loan in the future is an acceptable repayment strategy, as long as the effects and risks of such a strategy are carefully explained to the client upfront, and in writing. There would also need to be evidence on file of how this change would become affordable, preferably with some stress-testing calculations in place too in case interest rates rise in the meantime.
“It would not be an acceptable strategy however, if there was no likelihood of meaningful changes to the borrowers income in the future to be able to afford to convert in this way.”
“We also know all too well that borrowers conveniently forget they needed to put in place a plan to repay the debt at the end of the term. They can also conveniently suffer total amnesia when asked to recount conversations that may or may not have taken place with their adviser, especially when someone is given a whiff of possible compensation, so documented evidence on file and saved forever is key,” he added.
Wilson said: “As an example, my supervising network sensibly keeps electronic files for 80 years, and this is solely to be able to defend complaints.”
Long live the BDM!
Last week’s Star Letter comment, which questioned the need for business development managers (BDMs), also garnered responses.
Simon Wilkinson kicked off the support for BDMs, saying: “A good experienced BDM is a lifeline for brokers and their value should not be in question.
“The idea of different lender BDMs sharing a WhatsApp group is excellent and a useful way of getting cases placed and co-operation between BDMs is a useful resource for brokers.”
Danielle Panteli weighed in, adding: “BDMs are so valuable. I’d say I speak to at least one of our BDMs once a week.
“Some I’ve known through my almost 20 years doing the job and are more like friends. A BDM’s guidance, help, advice quite often decides if a case goes through or not. I’ve had more situations than I can count where a case has been declined and a BDM has managed to turn it around.
“I, for one, love our BDMs and love seeing them in the office for a coffee and catching up. It’s also hugely valuable for new staff to learn the lenders USPs and during the last year we’ve relied heavily on our BDMs support with various changes in criteria especially for the self-employed. Long live the BDM.”
Arron Bardoe said: “How can any broker demonstrate they are maintaining their awareness of lenders’ criteria and getting their clients the best deals without speaking to their BDMs?
“While the quality varies in what support a BDM can provide, they make all the difference in my business.”
Tiffany C saw things from both sides, saying: “Not all BDMs from each lender are as co-operative or truly adding any value compared to others.
“I know some BDMs who go the extra mile for me and my cases which makes a huge difference than if I didn’t have that relationship in the first place. There are certainly some BDMs who are just there and not adding any extra value than if I called the broker helpdesk or looked it up on their website.”