Coreco was founded in 2009 with 10 employees. The firm now employs 65 and has opened a Southend office to house its customer services team.
Montlake (pictured) said the firm has pivoted over the last three years to become a “national broker”. This has involved talking to different introducers and recruiting “incredibly talented people and newcomers” outside of London.
Montlake acknowledged that the pandemic had changed mindsets around remote working, noting that the company has a protection-only broker in Wakefield, and an administrator in Scotland who is training up to be an adviser.
He said the company’s recruitment focus was on servicing lead flow, finding the right people who fit and add to the culture, and an increasing focus on hiring protection specialists.
He added that protection was an “area where we have failed at for several years” for the firm, but following a cultural shift, now viewed itself as a “mortgage and protection broker”.
Montlake said that Coreco now has two protection-only brokers to complement its six mortgage and protection brokers.
Commercial, new build and equity release areas of interest
Coreco’s areas of interest in the near-term include new build and commercial mortgages, as well as opening more franchises nationally.
Montlake said commercial was a “great market” and an area “where brokers can excel in” as it was a “grey area”, adding that its commercial department, under Julian Ingall, has been “very successful”. But now is the time to “grow the business” and seize opportunities with small housebuilders and property developers.
Montlake believes that new build is an increasingly important and growing sector of the market as more homes are needed.
The firm has therefore hired new build expert Matt Thorn to grow the team and business further in that direction.
He added that Coreco would consider entering equity release advice in the near future, but it still needs the “right people”.
“We want to be that one-stop shop for people for a life and nurture those clients and empower them to make better financial decisions. That’s our motto,” he said.
Work with more partners and expand the network
Montlake said that Coreco’s priorities include developing introducers, working with more estate agents, increasing corporate partners and continuing to promote its website, social media activity, and brand awareness.
This includes expanding its Southend operation and adding telephony brokers.
He added that its purchase of Mortgages Online will be leveraged as a lead generation tool so it can better compete with digital mortgage brokers.
Network growth is also on the cards, with Montlake hinting at hopes to open an office in Scotland in the near future.
Coreco is working with two network partners, who are both looking to grow, and is “in conversation” with several more.
The firm is also developing a retirement plan for brokers who may want to pass on their client bank and earn as an introducer.
‘People powered by technology’
A point of frustration for Montlake is when people or firms would enter the mortgage market and say it’s “broken” and they were going to “fix” it.
“They’re talking nonsense. This industry is not broken. Yes, we can do things better, but we are one of the most well-run, well-regulated, consumer centric industries,” he said.
Montlake believes that as the technology in the mortgage sector improves, it will always remain “people powered by technology, not technology powered by people”. He cited companies like Habito and Trussle that he said had assumed they could disintermediate the mortgage market, only to find that’s not what customers wanted.
He said that these firms have since pivoted and decided to “put people front and center”, but that their efforts have boosted the intermediary services’ public presence for everyone.
“Although some people love to hate them, what they’ve done is made us look at ourselves and think about how we deal with our customers, how we use technology, and how the customer journey works. They’ve advertised so more people are more aware of what a mortgage broker is,” he said.
Key industry challenges
Montlake said that customers will now compare mortgage brokers to their last interaction with a company, so comparisons with Amazon, for example, will become the “standard”.
He noted that brokers who utilized technology to “enhance” the customer journey would be best-placed to succeed, and doesn’t think “old-fashioned sales operations will survive if they don’t adapt”.
Another big challenge for the industry is diversity and inclusion, which Montlake has put a lot of work in to in his role as chairman of the Association of Mortgage Intermediaries (AMI). He said particular focus needed to be paid to recruitment, retention and promotion.
“I think that’s imperative. It’s not just a moral obligation, but there’s a clear, proven business rationale for it.”
Montlake said that “diversity of thought” would only make a business better and customers will increasingly want to see themselves in the companies they interacted with.
The governments green agenda also presents a lot of uncertainty, according to Montlake, particularly with the practicality of getting all properties up to the required Energy Performance Certificate rating in time for the proposed, yet unconfirmed, deadlines. He expressed additional concern over how the mortgage industry could encourage landlords to make the required changes in time.
Montlake continued that recent papers and proposed changes from the Financial Conduct Authority (FCA) were not “as well thought out as they should be.
“They could spend more time policing the bad people than just creating more work for the good people. The bad people are always going to do it, so I think that it’s just increasing regulation for regulation’s sake and increasing costs eventually get passed on to the consumer – that doesn’t help anyone.”
He added that there were “excellent people” at the regulator, and he had been “encouraged” by its engagement. However, he said more collaboration between brokers, lenders, trade bodies and regulators would be needed to yield the best customer outcomes.
“We’re a fantastic industry. In fact, in many ways, we’re a leading industry. I want everyone to know that, and I want more voices, especially more female and diverse voices, and a lot more competition.
“I look around at some of the new companies and leaders and I am excited about where they will take the mortgage industry,” he said.
According to data from Trussle, the average age of the first-time buyer has risen to 32, up from 29 a decade ago.
The broker said this was “unsurprising” due to house price inflation, adding that this could be further aggravated by the cost of living crisis.
Trussle added that first-time buyers have increasingly been opting for longer-term mortgages, with Office for National Statistics figures showing 63,158 35-year mortgages were taken out by first-time buyers. This is a 75 per cent year-on-year increase.
The broker explained that because of this, first-time buyers will repay more over the course of the mortgage term, although their monthly repayments may be more affordable in the short-term.
The retirement age has also continued to grow, with state pension age set to reach 67 by 2028.
Trussle said these factors mean borrowers could be paying off their mortgages for longer, which could impact how much they are able to save for retirement. It added that it could be likely that borrowers could even be paying their mortgage during retirement.
It recommended making overpayments, saying this could cut the term and reduce the overall cost. The firm said overpaying by just £50 a month could reduce mortgage terms by two years and save £5,000.
Amanda Aumonier, head of mortgage operations at Trussle, said: “This is an alarming trend that has been brewing for years. When purchasing a home, buyers naturally think about the here and now, which typically means looking for ways to keep their payments as low as possible.
“But, while taking out a longer term mortgage can be an effective way to keep short term costs low, you will end up paying more back in the long term. Not only this, but you could also still be paying off your mortgage during a period of life when your income begins to drop.”
She added that housing affordability had been “spiralling for years”, which meant first-time buyers could struggle to get on the property ladder.
“We have also taken a short-term approach into calculating the impact of soaring house prices. This new data shows that the ramifications will reverberate for decades to come and will lead to consequences not yet accounted for. If this trend is to be addressed, we will need to see urgent action on affordability today,” she said.
He will have operational and commercial oversight as the company aims for 100 staff by the end of 2022.
Robinson (pictured) previously worked at digital broker Trussle as vice president of sales and operations where he helped the team to double and supported the acquisition of Better Holdco. Prior to Trussle, he worked as sales director for One 77 mortgages.
Haysto aims to provide a faster and more transparent process for specialist customers. The platform allows customers to manage their mortgage, conveyancing and insurance.
The hire follows investment into Haysto last year from chief executive of OakNorth Bank Rishi Khola and tech specialist Steve Garnett.
Robinson said: “I’m delighted to be joining Haysto to support its rapid growth in becoming the specialist market leader in the UK. The business has been built on the foundation of providing an A star service to customers who don’t fit the traditional profile of high street banks.
“I’m excited about being part of its mission to help these customers through the maze of complexities to find the right mortgage, just for them. This is an area of the market that’s growing fast, and I’m particularly passionate about. My experience and enjoyment working within high-growth organisations is very much aligned to Haysto’s forthcoming plans.”
Jonny Moulton, co-founder and chief executive of Haysto, added: “Miles’s background of scaling and leading customer facing teams in high-growth environments – while seeing the challenges faced by first-to-market digital brokerages – is a perfect fit for Haysto.
“In six months, we’ve launched as a brokerage and recruited close to 50 people and plan to double headcount in the next six months to meet customer demand. Key to realising Haysto’s vision and market opportunity is inspirational leadership and execution ability and Miles brings both.”
In its latest Financial Stability report, the Financial Policy Committee (FPC) said that it would maintain its loan to income (LTI) for residential mortgage recommendations, which asserts that 15 per cent of the total number of new residential mortgages should not have a LTI ratio at or greater than 4.5. This applies to lenders whose residential mortgage lending is above £100m per year.
The FPC said that the LTI measure was more effective at reducing risk in a housing boom and also had less impact on borrowers in normal times.
It added that the FCA’s rules on affordability test combined with the FPC’s LTI limits “should be enough to protect UK financial stability”, and that it would also “make the rules simpler”. Therefore, it would consult in the first quarter of next year on withdrawing its affordability measure.
The FPC’s mortgage market recommendations, which it introduced in 2014, strengthened affordability assessments to prevent consumers from taking on unaffordable mortgages and made firms consider the impact of future interest rate rises on affordability.
Reports earlier this week had suggested that homebuyers could be allowed to borrow up to six or seven times their income, as opposed to 4.5 currently. The change would have allowed borrowers to take out larger loans, and potentially open up the housing market to younger borrowers who may need to borrow more to get their foot on the property ladder.
The FPC said that it was reviewing the measures in December last year and said that it would report the conclusions in the second half of this year.
Miles Robinson, head of mortgages at Trussle, said: “These changes should be approached with an air of caution. The rules were introduced in the wake of the financial crash to reduce the risk of homeowners accidentally taking on debt that could leave them vulnerable. As such, they are in place to protect homeowners from any volatility that can come from interest rate rises.
“However, soaring house prices mean that younger buyers on average have to save for 10 years to secure the large deposits that are typically needed to access the housing market. As such, relaxing the rules just slightly could enable hundreds of thousands of first-time buyers to own their own home much more quickly.”
Renters limited by FPC recommendations
A report earlier this year on Bank Overground, estimated that a quarter of renters could potentially see their borrowing options limited by their income under the FPC’s interest rate stress test.
The remaining three quarters of renters were constrained by the LTV limits.
It added that nine per cent of all renters could afford median-priced first-time home in their region, based on their current income and savings. Without the FPC rules in place then 11 per cent renters could afford a median-priced first-time home in their region.
The report said this suggested that two per cent of renters could afford a median-priced home in their region if they could borrow more than affordability tests currently allow.
It said: “This does not mean these renters are locked out of the housing market altogether. They could raise a larger deposit or take out a smaller mortgage on a less expensive property, consistent with the FPC’s intention to limit the number of highly indebted households.”
Mortgage debt and high LTV lending
In its Financial Stability Report in July, the Bank of England said that the mortgage debt and high LTV lending had risen slightly but were not near the highs of the financial crisis.
It said that the overall share of UK householders with debt-servicing ratios of 40 per cent or higher was 1.4 per cent in March. It said that this was higher than its pre-Covid equivalent, but below the 2007 high of 2.7 per cent.
It added that as of May, 80 per cent of households who took mortgage payment holidays had returned to regular payments.
The report added that in Q1 of this year six per cent of new lending to owner-occupiers was at 90 per cent LTV or above, which was down from 20 per cent in 2019. This was partially due to lenders pulling their higher LTV products during the pandemic.
It said that the proportion of high LTV loans out all outstanding mortgages was still lower than pre-global financial crisis level.
The share of new mortgages LTI ratios of 4.5 or higher increased to 10.4 per cent in Q1 this year, up from 9.5 per cent in the same period last year and below the FPC limit of 15 per cent.
The company entered the UK mortgage market in July after acquiring broker firm Trussle for an undisclosed sum.
On 1 December, Garg gathered employees for the video call to let them know that 15 per cent of the workforce would be laid off in what he said was a “really challenging decision to make”.
He then revealed that the decision affected everyone who was on the call and their termination would be effective immediately.
Garg said the firings were due to “the market, efficiency and performances and productivity”.
However, the day before employees were let go, Better.com received a $750m (£565m) investment from two of its backers, Aurora Acquisition Corporation and SoftBank and earlier in the year, revealed the company would be going public on the US stock market.
Trussle also laid out plans to ramp up employment at the firm, announcing it would aim to hire 1,000 brokers next year.
On the call, Garg said: “This isn’t news that you’re going to want to hear but ultimately it was my decision and I wanted you to hear it from me. It’s been a really, really challenging decision to make.
“This is the second time in my career that I’m doing this and I do not want to do this. The last time I did it I cried. This time I hope to be stronger. But we are laying off about 15 per cent of the company.”
“If you’re on this call you are part of the unlucky group that is being laid off. Your employment here is terminated. Effective immediately,” he added.
Better describes itself as an alternative digital mortgage provider which aims to make homeownership more affordable and accessible through its incentive of no origination fees, no commission and transparent pricing.
It launched in 2016 and completed $1bn (£721m) in lending by 2018. Better also offers home insurance and estate agency services.
Through the acquisition, Better plans to introduce Trussle to estate agencies, property developers and financial services companies and invest in its customer origination.
Mortgage Solutions has contacted both Trussle and Better.com to ask if this would affect the UK brokerage. Neither company has responded.
According to a survey by Trussle, which collated views from 2,000 homeowners with children, more than half would consider downsizing to help their children through university.
The report added that student rental properties were still an attractive proposition for investors with rental yield pegged between 13 and 18 per cent higher than the general private rented sector.
There were concerns the pandemic would negatively impact student lets as lockdown and remote learning could reduce enrolments, however UCAS reported an 8.4 per cent annual rise in applications this year.
Paragon research earlier this year also showed that student tenant demand was strong, with a quarter of landlords reporting a rise in demand since the start of the pandemic and just over half saying they saw no change.
Miles Robinson, head of mortgages at Trussle, said: “It’s true that buy-to-lets aren’t the bargain that they once were. Changes to tax and the stamp duty surcharge have impacted returns, which made rental the king of investments, leading to a peak in popularity during 2007.
“However, this new data shows that property is still seen as a safe and reliable way of generating extra income. This can be both in the short term, through rent collection and long-term gains in house prices. In addition, the low interest climate means would-be landlords can lock in a competitive buy-to-let mortgage, which are typically interest only.”
University towns with best rental yields and cheap towns
The report continued that Newcastle University offered best rental yield for student property of 9.4 per cent, based on an average house price of £192,567 and average rental income of £18,096.
This was followed by University of Southampton with a rental yield of 8.9 per cent, with average house price of £235,911 and annual rental income of £21,084.
Cardiff University came third with an estimated rental yield of 7.64 per cent with house prices pegged at £274,531 and annual rental income of £29,076.
The report added that the UK’s cheapest university town was Belfast with house price estimated at £152,175.
Aberdeen was the second cheapest university town at £154,480 and Dundee came third with house prices pegged at £174,173.
Most of the demand is coming from remortgage customers, with those applicants applying for 74 per cent of leads for mortgages priced at less than one per cent.
Miles Robinson, head of mortgages at Trussle, said: “Buyers now have the opportunity to guarantee record low interest on their mortgage payments for up to five years, offering them certainty and stability.”
This is all great news but buyers will need significant deposits, typically of around 40 per cent. As a result, those who can only afford high LTV products, like first time buyers, are still missing out on the lowest interest rates available.
He added: “This is creating a real disparity in fairness across the market where those with the least capital are unable to take advantage of interest rates below one per cent. We hope to see more low interest fixed term products become available. But, we urge lenders to ensure that all buyers have the opportunity to access the most competitive rates.”
Robinson leads Trussle’s team of mortgage advisers and case managers and and was shortlisted for Business Leader at the British Mortgage Awards in 2019.
Greg Cunnington, director of lender relationships and new homes at Alexander Hall Associates, said: “The record low mortgage rates we currently see in the mortgage market reflect the desire of the main lenders to lend right now, and I definitely agree with Trussle that we are in the middle of one of the most competitive ‘price wars’ in the market I have seen.”
He added: “With the strong capital positions of many of the major lenders, it wouldn’t surprise me to see rates drop slightly more in the coming weeks too.”
Borrowers need a 40 per cent deposit to achieve the top market deals, but mortgage rates continue to fall across all loan to value tiers.
David Hollingworth, associate director at L&C Mortgages, said: “The fact that we not only have two, three and five-year fixed rates below one per cent but also a growing number of lenders offering them, underlines just how competitive the market is right now as lenders continuously tweak and reprice to keep up. These rates will help attract borrowers and signal that lenders are eager for their business but there’s still a need for advice as they recognise that a great headline rate is only part of the story alongside criteria and fees.”
He added: “Although these rates require substantial deposits, the fierce competition in the market is also helping to drive down rates for those with a small deposit. However, I don’t think that we can expect to see parity with the sub one per cent deals which are likely to remain the preserve of those with a big slice of equity.”
Mortgages for those with a five per cent deposit are usually subject to requirements such as higher credit scores or a disregard for gifted deposits. Some property types are also disallowed, including flats and new-build homes.
While borrowers are not always able to obtain a 95 per cent LTV mortgage because of such criteria, level of provision has risen to 49 lenders offering a deal. However, this still remains below 2019 levels, when there were 372 options on the market in July, and compares to a peak in November 2019, when 949 were available.
Interest in 95 per cent LTVs has risen, with enquiries for this mortgage-type accounting for 26 per cent of new queries at Trussle during the month.
First-time buyers made up the majority of leads, with a 60 per cent share. Next-time buyers accounted for 34 per cent of leads, and borrowers who were remortgaging made up nine per cent of enquiries.
High LTV mortgages proved popular in general, Trussle said, with a tenth of completions in July 90 per cent LTV deals.
Miles Robinson, head of mortgages at Trussle, said: “The return of 95 per cent mortgages earlier this year was greeted with much anticipation. With greater application scrutiny and soaring house prices, first-time buyers were facing a challenging market and these high LTV deals are crucial to ensuring home ownership remains an accessible dream for all.
“There is clearly an appetite for high LTV mortgages, as we have seen significant demand for 90 per cent LTV deals, however, after making a real comeback in March it is disappointing that 95 per cent deals are failing to make the difference we hoped to see.”
