Why not introduce a tighter cap on broker remuneration? – Star Letter 01/07/2022
Paul Smulovitch responded to the article: Nature of mortgage broker role increases risk of burnout ‒ analysis
He said: “Excellent article and highlights the problems the smaller self-employed brokers face. Offering service and value to clients in an industry where if a deal doesn’t complete then we don’t get paid is a unique problem most people don’t see or understand, and adds to the stress and worry of the job.”
Paul Barnden also commented: “Great article and sums up the last two years of my life. I’m working on changes and need to factor in some ‘me time’ to my life. We can only do our best and sometimes acknowledging that can help, it certainly did for me. Wishing my fellow brokers, good health, happiness and prosperity.”
Tighter broker renumeration
Leel de Silva weighed in, saying: “I think FCA (Financial Conduct Authority) have realised there are many agents tied to, or have a too close an arrangement with, providers and are not independent enough. Although they have mentioned about product design and fees, what are they going to do about it?”
“Why not introduce a tighter cap on remuneration?” he continued. “Procuration fees to advisers are far too high compared to a standard mortgage, as well as lamentably long early-redemption penalties. If FCA set better rules on both, the ER (equity release) market will become much more competitive with providers having to compete with better rates.”
Lack of scrutiny into Green Grant installations is government’s only failure – Star Letter 24/06/2022
Andy Wilson responded to the article: Government will ‘not intervene’ with unmortgageable Green Grant spray foam homes
He said: “Whilst there are an estimated 250,000 UK homeowners with spray foam installed in their homes, I do not believe it is up to the government to compensate them for this potentially damaging product.
“The foam itself is not faulty. It does what is says on the tin: it will effectively insulate your roof against heat loss. The guarantees given out by the installers simply give a warranty against the product itself failing – which doesn’t happen. The problem is the issues it causes if not installed correctly, or the nature of the product causing moisture to become trapped against wooden roof timbers that can then rot. These faults are down to the installers, not the government.”
He added: “Where the government is at fault is by giving out ‘green grants’ for home insulation without any regard as to what is actually being installed. The grants people [grants administrators] told me that the government do not endorse any particular product, it just provides the money for homeowners to make their own choices.
“Bring on the unscrupulous salesmen touting 40 per cent energy bill savings and ‘cosy home’ rhetoric. Given targets for energy efficiency improvements, I fear we will see much more grant funding going to these people.”
Mortgage rates may fall in summer if housing market slows – Star Letter 17/06/2022
The first comments were in response to last week’s Star Letter about lender pulling mortgage products with short notice: Lenders cannot be expected to sell ‘loss leading’ mortgages – Star Letter 10/06/2022
Arron kicked off the discussion, saying: “Lenders are not selling mortgages at losses, but they want to optimise profit. Many have become inundated with work, so it is possible for them to sell the same loans at higher margins and keep their workflow under control.
He continued: “It is possible that mortgage rates may fall if the housing market slows over the summer, regardless of the base rate. Remember last summer when the base rate was unchanged, but lenders dropped rates as it is costly to have unlent money in their bank accounts, so it was better to lend at sub-one per cent than keep hold of it.”
John Yerou responded, saying: “I don’t think that’s the point he was making. It’s when lenders literally pull products over night with little warning that’s the issue. But I also think that certain lenders are profiteering from the situation.”
Give panel control to brokers
The next article to receive a comment was: The broker fed up with conveyancing setting up his own legal panel
Arron said: “Personally, I would rather see lenders offer cashback alternatives, then brokers can negotiate their own deals. It will spur conveyancers to work harder to win the business. Free legals allow some solicitors to provide an awful service and lenders are typically blissfully unaware.”
Lenders cannot be expected to sell ‘loss leading’ mortgages – Star Letter 10/06/2022
This week’s comment came under the feature article: Lenders should improve withdrawal process and work with brokers – Simpson
Albert Lyons said: “Whilst I agree it puts brokers and our clients in a difficult position, are you really expecting lenders to ‘take orders’ via their business development managers (BDMs) to allow us to book funds on products that have actually become loss leaders?
“Would you sell products at a loss and then continue to do so because advisers need more time? You state ‘it is safe to say there is full understanding of the need to withdraw and increase rates, we also all appreciate that things move quickly and so therefore must the lender’.
“If there is a full understanding of why this is happening, then I’m not sure you have a point.”
Top-up terms should be included when porting a mortgage – Star Letter 27/05/2022
The first article to spark a discussion was: Mortgage porting: ‘Sold as a benefit, yet sometimes, it’s the opposite’ – analysis
Sox kicked things off, saying: “There are pros and cons, I agree it’s irritating having parts of the mortgage with different end dates and the lenders systems are all over the place on this subject.
“A clever broker though should look at the end date and try and help the client select a new deal as close to that as possible. So, maybe encourage a three-year deal over a two or five-year, rates permitting and not being overly expensive, of course.
“Also, weigh up a couple of months paying variable [rates] instead of a hefty penalty. This surely has to be ‘best advice’; overpaying a penalty which in most cases will get added to the new loan and interest charged for the life of the mortgage? My compliance department are turning cartwheels over the very thought.”
Stuart Phillips weighed in, adding: “Clients just need to understand there’s always a cost. Porting just kicks that down the road to a point where the cost is cheapest. Same as any mortgage advice, it’s about getting them what they need for the least cost to the client.
“Lenders could assist by allowing top up terms to match the current deal though.”
Hugh De Mann agreed with Sox, and added: “You should do what is best for the client, not expect them to pay an early repayment charge (ERC) just to get on one new deal.
“I always explain about porting and a bit of good factfinding will usually reveal when a client is likely to move. I also agree though that porting can be messy, I recently had a Natwest client on three products with differing end dates, but there was no financial justification to pay ERCs.”
The risks of foam insulation
Another article which garnered a response was: Advertised sub-floor spray foam insulation responsible for unmortgageable homes – RPSA
Andy Wilson said: “There are thousands of homeowners out there with the problem, and it is getting worse. Many have called me for advice, but there is little I can do except explain the problem again.
“For equity release, question number one for new enquiries is ‘do you have spray foam insulation?’ and if the answer is yes, the enquiry ends there – with a detailed explanation of why of course.”
He added: “Homeowners caught in this way are understandably bitter that no one mentioned the downsides, only the powerful insulation benefits. Whether the foam will actually cause their roof any damage is largely irrelevant, as the lending industry is by and large blighting these properties, where the only solution for many is the manual and laborious removal of the foam, at great cost which often exceeds the costs of installation.
“I would suggest the government does not offer green grants for this type of insulation in their next round of free money giveaways for home insulation improvements; installers are required to put in writing that the installation may cause potential problems with lenders and surveyors, and there is more education for the general housing industry about the issues.”
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.”
‘It is time to ban agents from selling services to both sides of a transaction’ – Star Letter 22/04/2022
This week’s comment came in response to the feature: ‘Immoral’ estate agent sponsored advisers are bad for everyone ‒ JLM Mortgage Services
Arron said: “It is time to ban agents from selling services to both sides of a transaction, as it has muddied who is their customer and whose interests are primary.
“Inflated legal fees are now becoming the norm with £500 referral fees. Together with compelled mortgage advice, none of this serves consumer interests or protection.”
Darryl Dhoffer added: “I pre-arm my clients who are looking to buy with the following – and it does seem to work with some agents: ‘The Estate Agents Act 1979 states that every offer must be put forward to the seller regardless of whether the buyer has obtained their mortgage from the broker recommended by the estate agent’.”
In-house referrals for estate agent and developer services should be banned – Star Letter 18/03/2022
The first comment was in response to the story: End to doubling ground rent terms for thousands of leaseholders
Arron said: “This scandal was possible because developers are still coercing buyers into using in-house brokers and solicitors. These should be independent parties looking out for the buyer instead of their income generator.
“The government needs to ban developers from selling or recommending any services to buyers; alas there will be backhand deals if there is a grey area.”
Arron added: “The same should apply to estate agents as I still get cases where buyers are told their offer will not be put forward if they do not use in-house services.
“Buyers cannot be assured of independence nor confidentiality, so the only safe option is to ban referrals.”
Landlords are victims of cladding scandal too
The second comment was in response to last week’s Star Letter article, where a reader suggested buy-to-let landlords should be prepared to pay cladding costs as part of their property investment risk: BTL landlords should pay cladding costs – Star Letter 11/03/2022
Kerry Pace said: “I am a buy-to-let landlord by accident rather than design. My first buy-to-let – a very modest 450 square foot one bedroom flat in Croydon was my residential property – bought before my marriage. There were penalties attached to the mortgage so I kept the flat. I wasn’t even on the mortgage of my first marital home.
“Our cladding affected flat was bought – same size as the first buy-to-let – five years ago for our own use, not as a buy-to-let initially. We tried to sell because it wasn’t suitable for us. We found we could not due to cladding. In the meanwhile we had found a more suitable property which will be our ‘forever home’ when we return full-time to London.
“We would have sold the cladding affected flat but we can’t. We would have sold the only buy-to-let we had until this issue started, but now we can’t because we had to raise the mortgage to enable us to buy the new flat. This means we now have a massive capital gains bill we cannot afford right now.”
She added: “Even with cladding ‘sorted’ we won’t make a penny on the sale of the flat as it’s actually dropped in value since the purchase and I suspect it will be tainted by all of this.
“How can it be OK to provide help to leaseholders with no regard to status and yet discriminate against landlords with leaseholds on 11-18m flats? This is just unfair. It is clear it is unfair to discriminate victims and treat people differently.”
Kerry also responded to the article: Reimburse leaseholders for cladding costs and include portfolio landlords in exemptions, MPs say
She said: “Landlords are taxpayers too and are not to blame for this. You cannot discriminate in this way. Nobody expects to make a profit on sale of any asset, but nobody should be expected to find potentially massive sums to fix something that isn’t their fault.”
Landlords should realise property is a risk and pay cladding costs – Star Letter 11/03/2022
Landlords should of course pay for the cladding cost. They cannot expect the taxpayer to subsidise the profit they make on selling the property as they have enjoyed a good level of rental income over many years.
Tricky mortgage cases are more rewarding and lead to referrals – Star Letter 04/03/2022
This week’s comment came in response to last week’s Star Letter: Brokers fear ‘rise of rejection will lead to panel removal’ – Star Letter 25/02/2022, where a reader suggested that brokers felt nervous when dealing with complex cases as they feared having mortgage applications denied would lead to them being removed from lender panels.
In response, Alykas236 said: “Surely, the ‘tricky’ cases are the ones brokers need to be helping on?
“Often, the tricky cases are a) more rewarding – professionally as well as financially – and b) lead to more referrals and add-on protection and general insurance sales.
“Brokers dealing in purely ‘vanilla’ cases are surely spelling the end of their own businesses? Adding value and expertise is why we are in business, no?”