Forward planning and focus will protect firms from low supply and purchase levels – Clifford
We see the outlook for the rest of 2021 and beyond as positive in our sector, and part of the reason for this are the great swathes of demand that need to be catered for, even in the post-stamp duty holiday period.
It’s not consumer demand we need be concerned about, which is why I did not feel as strongly as some about the benefit of extending the stamp duty holiday and the likelihood of creating even greater demand.
The fact of the matter is that without a greater supply of transactions – both new-build and second-hand – we will find ourselves still confronting issues.
Of course, calls to increase supply are nothing new. They have been coming for the best part of three decades.
This government announced in its Queen’s Speech in May a Planning Bill introducing partial relaxation of planning laws in order to allow more housebuilding.
What’s interesting is how local communities may react to plans to vastly increase housing supply.
The recent Chesham by-election was won by the Liberal Democrats from the Conservatives. Much of the battle centred on the new Bill and the perceived detrimental impact relaxation of planning law could have on the area, particularly by potentially permitting development on greenfield sites.
It was reported that the Lib Dems made a big play of pushing back against the Bill because this went down well on the doorstep with constituents. If the Lib Dems can achieve political cut through by opposing the Bill in Conservative seats that are targets for them, then it’s guaranteed to be an issue they will keep pushing in other constituencies across the country.
The government might therefore feel the need to review the Bill, if it’s not playing well with core Conservative voters.
If that does happen, what will be the chances of boosting housing supply in the numbers that are required? Will we see more focus on former retail units perhaps? And what type of properties would need to be built on those sites to make them alluring to potential homeowners? Are we building enough on the brownfield sites in this country without having to go looking for greenfield locations where housing developments have the potential to generate significant local opposition?
It’s a perennial problem for our market and will clearly impact the number of purchase transactions we see moving through the process. It will also likely add a degree of uncertainty to the sector, especially for advisers who may well have benefitted from high levels of purchase business over the last 18 months.
That said, advisers tend to find a way to generate new business, even if the purchase activity recedes for a period.
Indeed, I imagine advisers are already planning for this slight market rebalance by prioritising remortgage and product transfer activity, ensuring that existing clients are in no doubt about where to return for their advice needs, and diversifying widely to cover off clients’ requirements for protection, general insurance and other relevant services.
Supply, or the potential lack of it, could play a greater role in all our professional lives going forward, but that shouldn’t be a surprise.
With a degree of forward planning and a focus on all the other opportunities that exist, advisory practices should have the tools to ensure this doesn’t negatively impact on their business model.
Advisers should relish in attention-grabbing sub-one per cent deals – Clifford
Certainly, it’s a big tick for innovation and reputational PR, as a major operator like HSBC works hard to stay in the mix on competitive rates which help brokers.
Similarly for Platform, they may feel the name and brand recognition is worth a foray into this highly competitive low rate.
Not just for the few
Of course, there can be some moans from advisers about the launch of such headline-grabbing rates which may have a very small ‘catchment area’ in terms of borrowers or clients who qualify for them.
However, from my view, we should not underestimate the new business such ‘headlines’ can generate for advisers. Existing clients and potential new ones see these rates and this often acts as a catalyst for activity, even if they are unable to grab that particular mortgage product.
Any activity which continues to drive borrowers to consider the rates they are on, and whether they are currently overpaying on a standard variable rate (SVR), and ultimately ensures they seek the services of an adviser is no bad thing in my book.
Are we going to see an over-supply of this low-rate and low-LTV segment though? Possibly, but again a plethora of choice is good for advisers and consumer outcomes. Better to have too much to choose from than a dearth of product.
Benefits to the lender
Plus, for those who say business levels written at these rates will be negligible, we shouldn’t underestimate the importance of securing new borrowers. The bigger lenders, for instance, see redemptions and significant borrower outflows every single month, and this will increasingly happen as we see remortgage activity beginning to thrive again.
That back book has to be replenished.
Most lenders also have substantial new business targets to achieve this year. At the start of the year, if you carried out a back-of-a-fag-packet totting up of each lender’s aspirations for its own 2021 lending versus the gross UK lending available, you will have noted the combined targets were substantially greater than the market total.
Some will prosper and grab the share they need and some will not.
The leading players won’t want to lose market share and, with strong balance sheets and their access to relatively cheap funding, they are much more able to turn up the dial through the likes of cheaper rates.
Service standards get you a little extra – especially in a very busy market – cheaper products can win you a lot.
You, the adviser, remain vitally important to mortgage lenders and their desire, perhaps need, to maintain or even grow their own market share.
This fight for quality and volume is good news for intermediaries and borrowers.
Long-term fixes can work, but only with advisers onside – Clifford
Both new and existing lenders were talking about it, one specifically coming to market with a new proposition and rumours about more to follow.
Plus, we had the launch of Habito One with its range of long-term products. Was this to be the point where long-term fixes finally gained some serious traction?
Well, maybe. Although, since the introduction of the government’s guarantee scheme to encourage lenders into the 95 per cent loan to value (LTV) mortgage space – a product likely to appeal to the same borrower demographic as long-term fixes, namely first-timers and second-steppers – there might well be a feeling that this has stolen some of its thunder.
It can also feel that the long-term fixed-rate market has some considerable obstacles to overcome that are simply not there with other mortgages targeted at advisers servicing these types of clients.
Namely, the competitiveness of the pricing versus the lender’s risk appetite and margin objectives, plus of course the term of early repayment charges and, rather importantly, fair procuration fees.
An exercise in patience
Of course, these are not insurmountable by any means – and I’m aware of those active or wanting to be active in this sector reviewing how their propositions can deliver positive outcomes – but they will need development and buy-in from the sector, not to mention consumers.
And that may well take significant time and investment on the part of the lender and the adviser.
Advisers naturally need to determine the suitability of clients for long-term fixes. I’m certain that this will only prosper if it is an advice-led product.
This is why the intermediary market has tended to regard long-term fixed rates in the same bracket as products like current accounts or offset mortgages, in that they undoubtedly require adviser intervention and explanation before any borrower should take one out.
Match the mortgage to the client
What might on the surface look like a no-brainer to someone who might not be overly well-versed in the mortgage market, and who might respond well to an advertising-led focus on ‘never having to change your mortgage again’, may clearly be the wrong product at the wrong time for the wrong circumstances.
However, that’s not to say there isn’t a pool of borrowers for whom a long-term fixed-rate could be precisely the right outcome.
However, it is advisers who will need to show the benefits of these products, which is why I feel an adviser-focused distribution focus is the right way to go, rather than the hope that direct-to-consumer might work.
There are inherent risks in that approach and, if I were a lender, I would be much more confident knowing my product range was being distributed by professional advisers able to ascertain the suitability of the mortgage to the client.
Rather than offering it up as the best thing since sliced bread to consumers direct, only for them to find out later down the line that it was a foolish decision.
Stonebridge completions rose nine per cent to £8.5bn – results
March 2021 lending completion figures alone were over £1bn, a 79 per cent year-on-year increase while mortgage application figures for the month were 20 per cent up on the previous year.
The client mix analysis showed purchasers made up 57 per cent of its overall mortgage applications, compared to remortgaging at 43 per cent, against a 49 per cent – 51 per cent split the previous year.
Stonebridge said its Appointed Representative (AR) firms were continuing to maximise the opportunities presented by the stamp duty holiday extension providing a further catalyst to borrower demand, with April 2021 as strong as March for both completions and applications.
Stonebridge also boosted adviser numbers by 18 per cent to 829 registered individuals across 412 firms, both through its own broker firms and a centralised recruitment drive, with authorisation of a further 124 RIs pending.
The network said staffing levels had grown by 24 at head office with additional resource in every department
Rob Clifford (pictured), chief executive of Stonebridge, said: “Given how the financial year started for the housing and mortgage market back in April last year, to have posted these excellent results, particularly for mortgage lending and growth of the business, is very satisfying and testament to the quality of our AR firms and those of the entire Stonebridge team.
“To say the last 12 months has been challenging would be an understatement, and while our head office is again open – and we have made a considerable investment in turning it from a traditional office to a more collaborative space – the majority of Stonebridge staff are still working remotely by choice.
“I am incredibly proud of the way they have handled their work responsibilities through this pandemic and their continued commitment to supporting our AR firms,” he added.
Clifford said: “Overall, and in particular because this has been a year like no other, I must say a huge thank you to all AR firms, all our lenders and provider partners, and all of the Stonebridge team. It has been tough for all at times but everyone responded magnificently to these trying times, and rose to the occasion.”
Brexit could mean future mortgage process changes to go with current pains – Clifford
There has been some recent consternation from advisers about greater difficulties trying to secure UK expats residential mortgages in this country, because of lenders withdrawing the proposition. I suspect this is more to do with short-term regulatory caution, than anything else.
However, it’s clear the passporting system – which allowed firms in the UK to carry out activities in another EU member state – is no longer available.
And the fact the trade deal didn’t include financial services means that firms are having to provide ongoing services based on local law and regulation in each country.
That has probably resulted in some lenders deciding ‘not to go there,’ at least for the short-term, while they work out what regulatory risks and responsibilities they have in providing products to customers in those jurisdictions.
You might well have read of some expat customers having their bank accounts closed, and this ties into the same issues banks and other lenders are grappling with.
The Association of Mortgage Intermediaries (AMI) factsheet covers off a number of key areas particularly the loss of passporting, data protection and employing EU citizens in the UK.
It will be regularly updated and, if you are a firm, which has traditionally provided advice services to clients in other countries it is certainly one to keep abreast of.
Taking back control?
Part of the whole Brexit conundrum was to what extent the UK would take back control?
Now that has happened, in our sector there is likely to be a growing debate around the extent to which the UK might want to row back on those parts of the mortgage process that were introduced through EU law.
For instance, there was much debate at the time around whether the ESIS added anything to the UK process over and above what we were already delivering from our Key Facts Illustration (KFI).
The general answer tended to be, not much, and I see there is already some support for a return to the KFI, with the ousting of the ESIS.
Part of me feels that, certainly at this time, there is little point in making that move, not least because of the anticipated costs in moving back to the previous regime, especially in terms of what would be required in widespread system changes.
AMI suggests the cost would be in the region of £20m to do this – I tend to agree that, particularly now, that doesn’t seem like a hill worth dying on.
However, in the future, that argument might shift and we should perhaps prepare for a re-evaluation of the UK process, and whether it is worth keeping those parts which were introduced only because of the UK’s EU membership and commitments.
We could be some way away from it, but one might believe that further change is likely, especially if the benefits are deemed to have been very slim, or indeed, non-existent.
Virtual viewings no match for real world eye test – Clifford
Whether the utilisation of, and reliance on, technology changes everything about the way we work in the future remains to be seen but the immense impact is already becoming clear.
Take for instance a recent tweet from a mortgage adviser which showed both the possibilities and the limitations of utilising technology within the home buying process.
The adviser said that a client had done a virtual property viewing and put in an offer.
When they were able to physically see that property, they had immediately withdrawn their offer, noticing a number of issues that had just not been visible during their remote, online tour.
That ability to have a good look around a property is a fundamental component in the process, although of course, there are many properties sold without a physical viewing by the buyer.
In the lockdown our own SDL Auctions business has sold more than 250 properties without the buyer seeing them, but we all know this is a small minority in a normalised market.
Essential face-to-face advice
Despite all the benefits that technology delivers, our industry could only truly get moving again when lockdown measures were partially relaxed and the opportunity to visit properties was made available.
Of course, this is only for England at the moment and those in other parts of the UK are still not there yet and therefore any return to a new normality there is going to take a little longer.
That is not to disparage how crucial technology has been throughout this period.
However, we must also recognise there are some limitations – take client meetings for instance.
While using online video conferencing has been a real God-send, advisers often talk about the empathy and connection they have with clients when meeting them face-to-face and how, when seeing where they live and their situation, this can often change the direction of the advice provided.
That connection is not always possible via a telephone or online chat.
I’m thinking specifically of advisers who might deal with clients at two ends of the spectrum particularly – first-time buyers and those in later life – who tell us they benefit the most from a face-to-face approach.
In that vein, while technology will continue to be deployed and adopted far more than pre-Covid-19, there will be large numbers of firms who do want to get their staff back out in the field, or indeed into an office.
Our own poll suggests just a nine per cent swing in the firms who will move away from face to face, to a remote service.
Having seen that operating remotely can work, it’s just not their preference or indeed their plan for the immediate future.
There is a different energy to working within close proximity of each other, with the ability to bounce ideas off colleagues, develop strategies and solutions, that is just not quite so easy through the laptop screen.
Meanwhile, especially at the moment, our sector has a challenge to overcome in terms of ensuring office spaces are safe.
It will be about getting a happy medium between having that work-space available but certainly for a reduced number of staff.
Some of the challenges of how we work with each other and with our clients are only just about to be encountered.
Flexibility and inventiveness are going to be needed, much will be done by trial and error, and good broker firms will be sharing best practice.
Mortgage advisers are a community, don’t be afraid to ask for help – Clifford
In that sense, advisers find themselves in a unique position because they can provide both via much-needed advice and are able to help deliver exactly what individuals want when it comes to their biggest financial commitment.
Also, they can potentially act as a conduit between borrower and lender in order to provide the necessary information that clients will be looking for.
Let’s be in no doubt that our market has, what is likely to be, a very anxious client base at present.
The measures that individuals are having to take are likely to become more extreme with each passing day due to the constraints and threats resulting from Covid-19.
This has had a significant impact on people’s lives, their work and, in many cases, their ability to earn money.
With the timeframe being talked about in months rather than weeks, it is no wonder that all kinds of borrowers will be weighing up their ability to continue paying their mortgage and their other bills through those months.
Understandably, borrowers have been looking for answers from their lenders to establish if they are eligible for the three-month mortgage payment holiday announced by the chancellor and how to activate it.
Advisers can clearly work with both sides to present that information, but also having that client contact should allow them to weigh up their existing needs and circumstances, not just over the short-term but beyond that.
If there is money to be saved, then which borrower in the current climate wouldn’t welcome this? If a protection need can be satisfied – and again, many borrowers are likely to be thinking long and hard about this now – then that should also be looked at.
There are plenty of other financial needs that can be addressed, and advisers are clearly best placed to do this.
Consistency in a new normal
Our working environments may have changed recently, with working from home being the new norm, but the underlying fundamentals of the provision of advice don’t really change.
It’s about making client contact, outlining the products, services, support and help you can provide, and making sure that every client gets the most suitable advice and products for their needs now and in the future.
Make use of all resources to do this and ensure that your existing client base is a top priority.
It’s also important to look after you and yours.
Many advisers are in similar boats to their clients – many are self-employed or part of a small business, they are concerned about how work might look in the months ahead, how they can maintain their services through technology, and how they can remain active, compliant and successful.
Certainly, network support for appointed representative (AR) firms and advisers will be crucial, and if you’re not an AR, then think hard about the distributor or third-party support that is available for directly authorised firms.
No adviser is an island – none of us have ever been able to do this job on our own and it’s at times like these that quality support can make all the difference.
Don’t be afraid to ask for help, and certainly don’t be afraid to accept it.
Mortgage advisers are a community and advice should not only be given but also taken when appropriate.
It’s in all our best interests to work together to get through this, and we at Stonebridge are certainly doing all we can to provide the crucial support required by brokers in the tricky period ahead.
Stonebridge facilitates £7.7bn of mortgage lending
Mortgage application case numbers received by the network rose by five per cent on the previous year and by value they increased six per cent.
Strong protection volumes for the network generated £16.5m of life commissions, up by 10 per cent on 2018, it added.
General insurance business completed in 2019 increased by 13 per cent on 2018.
In the analysis of its mortgage business, Stonebridge revealed that purchasers made up 49 per cent of its overall mortgage submissions – this had fallen slightly from 50 per cent in 2018 and 55 per cent in 2017.
The other 51 per cent of its business was made up of remortgage or product transfer business. Some 20 per cent of its remortgage business was for product transfers.
Stonebridge also said that its buy-to-let business had remained steady during 2019, holding firm at 17 per cent of its overall business submissions, the same figure as 2018.
Of this buy-to-let business, purchases had increased to 24 per cent, up from 15 per cent in 2018, and 76 per cent was for remortgaging.
The network said its growth was slightly ahead of forecast reflecting its continuing progress in driving up income per adviser, with this figure outstripping adviser growth.
Stonebridge revealed a 7.5 per cent growth in adviser numbers over the course of 2019, with the network having 644 individual advisers in 320 appointed representative (AR) partner firms at the end of the year.
Positive year ahead
The network announced plans to upgrade its Revolution software system with features such as dashboard reporting, additional equity release capability, and the introduction of automated fee agreements, file checking and compliance remedies. The system developments will be completed by the end of 2021.
Jo Carrasco, (pictured) business partnerships director at Stonebridge, said: “Over the course of 2019 we outperformed the previous 12-month period, saw adviser and firm numbers increase, added new lenders and providers to panel, plus developed our unique Revolution system in a number of areas.
“There is no hint of us resting on our laurels as we have ambitious plans for the future and want to keep developing the Stonebridge proposition, helping our existing members grow their teams, and bring on board new AR firms that will grow and thrive within the network.”
She added: “Last year ended on a high with record mortgage completions and January applications continued in the same vein. We are highly positive about the year ahead and further into the future.”
Product transfers aren’t the easy option and proc fees should reflect that – Stonebridge
Where did the business achieve its aims and expectations? In what areas is it producing positive results? And conversely, which part of the business has not delivered as well as you might have expected?
What will interest all business leaders as much as it interests me, is the changing nature of the mortgage market, how advisory recommendations and consumer choices impact on that metric, and whether a move in direction can have either a detrimental or positive effect.
Product transfer shift
One area we can certainly track a shifting pattern in is the increased number of product transfers (PTs) advisers are now writing.
I think we’re all aware of the positives and negatives of this, not least the fact that writing increased levels of PTs is likely to mean a drop in income when comparing repeat business with a purchase or remortgage.
Whether we like it or not the prevailing wind on procuration fee payments for PTs is that lenders will continue to pay less, certainly when compared to a remortgage.
There will be lenders who argue a product transfer takes less work by the broker and therefore the fee should reflect that.
From my vantage point, the adviser should be conducting broadly the same amount of work, because they need to consider and validate the PT product while ensuring they’re aware of client needs and circumstances, as well as compare it against the rest of the market.
If, after that work has been completed, it’s decided the best course of action is the existing lender’s PT, then so be it, but I’m not convinced this fully justifies a substantially lower procuration fee.
Importance of protection
The other point to be concerned about if your business is steadily increasing its PT business, is around the ancillary sale opportunity – particularly when it comes to protection.
It’s a simple fact that in our sector advisers won’t arrange as much protection with PT clients as they might do with a purchase or remortgage, and this can have a greater impact on the income per adviser metric.
You won’t need me to tell you how important diversification is, and if by writing more product transfer business you might be neglecting protection or GI, then I would suspect this needs to be a priority area to review.
We certainly encourage our member firms to treat all PT cases as you would with other clients, and make sure they don’t walk out of the door under-protected or needing to go elsewhere for products you could deliver yourself.
The business mix within any firm needs to be right, and with a product like PT, which might to some look like an ‘easy option’, could have a disproportionate impact on the overall business.
It’s not for us to take that easy option just because it’s there, and in my opinion there’s no need for lenders to treat that business as requiring less diligence and expertise when it comes to proc fee payment either. That is, however, a race and an argument I suspect still has plenty left to run.
Stonebridge expands firm numbers by 23 per cent
As part of this growth it has seen its adviser numbers rise by 29 per cent with 142 more brokers as part of the group.
By the end of October, Stonebridge included 316 appointed representative (AR) firms with 639 advisers.
As a result, the network reported £868m worth of lending applications during last month – its highest month for lending applications submitted so far.
This figure was up from £820m in September, and up five per cent on October last year.
Stonebridge said its continuing goal for 2020 was to grow the number of firms joining and help existing members recruit new advisers “in order to expand their businesses to meet growing demand for mortgage advice”.
The network has also announced the recruitment of a number of new additions to its overall team.
Andrea Chambers has joined as business training consultant, Billy Perry as a business standards assessor, Anushree Parthasarathy as a developer for its Revolution trading platform, Francesca Sorrell as a sales support administrator and Charlotte Hamblin as helpdesk support.
UK lending marginally up
Rob Clifford, chief executive at Stonebridge, said there had been speculation about the UK mortgage market but its figures showed a steady picture.
“We anticipate that the gross mortgage lending figures for the year for all UK Finance lenders will be marginally ahead of 2018, and it’s clear from our own data that our AR firms are taking a larger share of this.
“Looking ahead, we anticipate that the demand and need for mortgage advice will only grow, and it may also be that those who’ve felt they needed to sit on their hands during 2019 – especially given the political uncertainty – will find they come to a point of action during 2020.”