BSLS2022: There could be lender ‘casualties’ due to funding costs
Speaking on a panel at the British Specialist Lending Senate, Generation Home’s chief commercial officer Graham McClelland (pictured) said there was “demand out there for mortgage paper” and “real interest from investors for mortgages”, especially in the specialist space.
“I’m sure that in time that funding will sort itself out, but there may well be short-term, or even long-term casualties,” he said.
One recent example in the specialist lending market has been Molo Finance, that had to temporarily suspend its buy-to-let products due to capital market uncertainty. The lender also had to change some existing mortgage offers and postpone certain completion dates.
Anth Mooney, chief executive of Vida Homeloans, said: “If non-bank lenders stand still and fail to diversify their funding models, then absolutely, I think there will be some casualties.”
Mooney said that for non-bank lenders the next 12 months’ funding costs would rise given the “level of uncertainty in the macroeconomic and political environment.”
He added that when setting its funding strategy, the key consideration was, and is, “ensuring certainty” for both customers and intermediary partners so that once a mortgage offer was issued they can have full confidence that it will be honoured.
“I can’t stand here with a straight face and say that funding markets will always be open, but what I can promise with 100 per cent certainty is that once a customer has a mortgage offer from us, they will always get their mortgage, because we always pre-fund our offer pipeline,” Mooney noted.
McClelland said that timing is very important when it comes to funding, adding that Generation Home had made a forward flow arrangement at the start of the year.
He said that the company, which was founded in 2019 and is focused on first-time buyers facing affordability and deposit challenges, has two main funding lines, one from a traditional private warehouse, and a forward flow arrangement that give it “plenty of runway.”
“The availability of funding and making sure that you have enough runway to support you when times get tough is always the critical thing. That’s what keeps you awake at night, but there is also an element of luck, particularly as a small lender,” McClelland added.
“It feels like we’re through the worst of that pain. We’re working really hard on finding supplemental forms of capital that are not deposit-based but are not necessarily market-linked. So, watch this space.”
McClelland continued that savings’ rates are also going up, so deposit-based funding was also more expensive, which he said should mean big lenders start to raise pricing for their products.
“Raising retail funding from a standing start is not particularly any cheaper than accessing the wholesale markets. It’s just that over time, it gives you a more stable, broader base, particularly if you’re looking to grow your business to a balance sheet of £5bn to £7bn, and that’s quite important.”
Mid-size banks are eyeing the specialist sector
Mooney said that big banks are currently “not servicing anything that falls outside of an automated process” and for mainstream lenders “to pivot to a more specialist lender model, which requires face-to-face solutions, open flexible dialogue with brokers and deep human underwriting expertise is really expensive.”
He added: “It is clear that some larger and mid-sized banks have aspirations to move into that near prime space, that grey area between specialist and prime, a market that is quite difficult to accurately size or define. But I don’t see the larger players having the appetite or expertise to expand beyond that into more specialist customer segments.”
McClelland said that what was happening in the rungs below the biggest banks was interesting, as they might start looking at the specialist space.
“If all you’ve got to compete on is price, but you know you’re going to lose, which is what’s been happening, what do they do? What do the bigger building societies do? And where did they go next?
“I think that’s quite interesting to see whether they can do it quick enough to keep up with the more nimble specialists,” he noted.
Rising swap rates will lead to price correction
McClelland added that previously if swap rates, which are integral to lender product pricing, had gone up by five basis points in a week that would be a “big deal”, whereas now they have continued to go up and up.
“I think this might be the first time in mortgage market history, certainly within decades, that the average the average product rate for a 75 per cent loan to value (LTV) mortgage was sub-swap rate. That means the big banks are out there lending money at a cheaper rate than it cost them to borrow in the market and this cannot be the most efficient use of their capital.”
He added that this was aided by having a “huge sticky base of customers that cost them next to nothing.”
Mooney predicts that mortgage pricing will continue to rise in the coming months, and that Vida has repriced some of its products due to increased funding costs.
“Some of the rates being offered in the market are unsustainable and we should expect to see a correction in both buy to let and residential mortgage pricing in the weeks ahead,” he said.
He added that forward swap rates were up by around 100 basis points since the start of the year, the prime market has responded with price increases of up to 70 to 80 basis points, whilst the specialist market has been slower to respond, with rates increasing by only 20 to 30 basis points so far.
Mooney continued that with ongoing talk of recession, there will also be discussions had across all mortgage lenders about credit risk appetite and the availability of mortgage credit, especially at higher LTVs.
“The current dislocation between forward swap rates and bank base rate is driven primarily by uncertainty. It’s uncertainty that kills markets and that uncertainty will therefore drive into a lenders appetite for risk,” he added.
Vida unveils exclusive club for industry leaders
This in turn, the lender says, will lead to better solutions for clients, many of whom are underserved by mainstream lenders.
The club was launched at an event in London yesterday. Founding partners, of which there are already 50, come from across clubs, networks, specialist distributors and new build.
Members can access exclusive products and will be able to build Vida’s proposition in partnership with lender, as it provides a space for debate and discussion.
There will be exclusive content, events and marketing support for members too.
The lender said the club was the “next stage” in its journey to create a structure, processes and environment to acknowledge differences in the market and to improve the journey for all parties.
Richard Tugwell (pictured), director of mortgage distribution at Vida, said: “Our partner companies told us that to build a greater understanding of their market needs they wanted to work more closely with us and co-create solutions for their clients. The V Club gives us the platform to make this happen and to support them as we continue our growth.”
Vida ups both max LTV for debt consolidation and loan size
The maximum LTV now stands at 85 per cent LTV where cases involve debt consolidation, and the maximum loan size has been increased to £2m up to 75 per cent LTV.
The lender has removed its £180 assessment fee from all residential products.
In its fee-saver range the lender will offer free valuation for properties up to £1m an also give £500 contribution to legal fees.
Vida has also changed criteria around repossessions from 10 years to six years.
Richard Tugwell (pictured), director of mortgage distribution at Vida, said the changes demonstrated its commitment to the specialist sector.
He said: “With the rising cost of living and increasing interest rates, specialist lending is going to become increasingly important.
“The product and criteria changes take account of the fast-moving pace of the mortgage sector, and we are confident that these will provide great solutions to borrowers who are cut out of traditional mainstream lending.”
Vida appoints chief risk officer
He will report directly to Anth Mooney, CEO, and manage a team of 16 with immediate effect.
McNeill (pictured) has more than 20 years’ experience in risk management within the financial services sector, which will be instrumental as Vida evolves to operate as a bank.
He joins from Coventry Building Society where he has been CRO for almost seven years. He has also held roles at Saffron Building Society, The Co-operative Bank and National Australia Group.
Mooney said: “As a lending specialist, Vida remains a relatively young company and we are at an important and exciting time in the development of the business.
“Fraser’s appointment is key to our growth strategy and he will be leading a strong, robust risk function. He will have a key role in helping to move Vida to the next phase of our journey. I look forward to working with him.”
Vida broadens self-employed and contractors’ criteria
Self-employed contractors can borrow up to 48 times their weekly rate, which is up from 46 times their weekly rate previously.
The lender said it will also consider contractors with a minimum track record of one year’s employment within the same line of work, half it’s previous minimum.
Contractors can also apply for a mortgage if they have three months left on their contract, compared to before, when borrowers had to have six months remaining on a current contract or a three month rolling contract that has been renewed at least once to be eligible.
Richard Tugwell (pictured), director of mortgage distribution at Vida, said: “We are determined to provide attractive, accessible products that support contractors and the wider self-employed market, who have been cut out of traditional high-street lending.
“We continue to see strong demand from our intermediary partners and want to continue growing our lending and offering a great service to brokers and customers”
Vida has had a very busy first quarter after updating its offering, increasing its procuration fees and tripling its product range to around 270 products in January.
The lender also brought out a key worker product and released limited edition residential and buy-to-let products.
It also created a specialist relationship team to offer a more “focused approach” to produce better broker and customer supports whose needs were more complex.
The lender is also working on its banking licence applications and is targeting £1bn plus of mortgage lending this year, which is roughly double the amount it lent in 2021.
Buy-to-let sector is ‘changeable lending environment’ – Armstrong
In such a changeable lending environment, it’s not easy to keep track but here is some of the most recent product-related news at the time of writing.
In terms of launches, CHL Mortgages released its first seven-year fixed rate mortgage. The lender has also increased its maximum loan to value (LTV) for individual and limited company borrowers to 80 per cent, up from 75 per cent.
Foundation Home Loans announced a new BTL product range exclusively for expat landlords.
Foundation’s expat proposition is available to non-SPV (special purpose vehicle) individual landlords who are UK nationals living as expats worldwide, as well as limited company borrowers.
Products will be available for standard BTL, short-term lets, houses in multiple occupation (HMO) and green options all available up to 75 per cent LTV for both purchases and remortgage with rates starting from 3.24 per cent.
Vida introduced a range of limited edition residential and BTL products. The limited edition BTL range includes five-year fixed rates for purchase and remortgage. A standard buy-to-let product at 75 per cent LTV is available at 3.04 per cent with a £1,495 fee and a fee-free equivalent starts at 3.19 per cent. For HMOs, a 75 per cent LTV product is available at 3.19 per cent with a £1,995 fee.
Hinckley and Rugby Building Society relaunched its BTL limited company lending proposition, boosting its current BTL offerings. This includes a five-year fixed rate at 2.95 per cent up to 70 per cent LTV with a £250 application fee and £999 completion fee.
Hanley Economic Building Society launched a five-year BTL fixed rate remortgage special. This is available from 3.03 per cent up to 80 per cent LTV with a £750 product fee and a valuation fee which is subject to property value.
Fleet Mortgages, Aldermore, TML and Paragon make rate changes
When it comes to rate changes, Fleet Mortgages cut rates by 20 basis points across all lifetime tracker products available in its three core ranges – standard, limited company and limited liability partnership and HMO/multi-unit freehold block (MUFB).
Aldermore Bank reduced product switch rates across its residential and BTL ranges for existing customers. BTL rates for individual landlords now start from 2.70 per cent, with reductions of up to 0.65 per cent, while limited company rates have been reduced by up to 60 basis points and are now available from 2.95 per cent.
The Mortgage Lender announced a series of rate cuts across its BTL product range. The lender has repriced its five-year fixed rate products at 75 per cent LTV, with rates now starting at 3.33 per cent for standard properties and 3.45 per cent for HMOs. Both come with a free valuation and either free legal services for purchases or £500 cashback for remortgages.
Rates have also been reduced at 80 per cent LTV, with rates now at 4.05 per cent. The product also comes with a free valuation and either free legal services or £500 cashback. In addition to the product repricing, TML has launched a new five-year mortgage at 3.20 per cent up to 70 per cent LTV with a completion fee of £2,495.
Finally, on the criteria front, Paragon Bank extended the window in which BTL borrowers can remortgage from three months to six months. Paragon will now offer borrowers the chance to remortgage up to six months ahead of their current buy-to-let product reaching maturity.
By the time you read this, additional product modifications are likely to have been made, such is the pace of change throughout the industry. And this only serves to highlight the continued value attached to the advice process and the support and expertise this can offer for a range of borrowers, not just landlords.
Leeds BS, Danske Bank and The Openwork Partnership among best companies to work for
The UK’s Best Companies league table, which was formerly known as The Sunday Times 100 Best Companies, measures workplace engagement in a survey that looks at employee engagement, charitable activity and employee support.
The league tables are subdivided into an overall list of small, mid-size and large companies.
On the large list, Leeds Building Society ranked 17th, Danske Bank ranked 39th, The Openwork Partnership came 40th, OSB Group came 48th, UK Finance was 62nd and Simply Conveyancing came 73rd.
In the small companies’ category, which is between 25 and 74 full-time employees, Teachers Building Society came 22nd and Twenty7Tec emerged in 27th place.
Within the mid-size companies list, which is between 75 and 199 full-time employees, Darlington Building Society came 19th, Marsden Building Society took 31st position, Vida Homeloans came 44th and Phoebus Software took 46th position.
Leeds Building Society
According to Best Companies, Leeds BS promoted a “healthy work-life balance” pointing to its hybrid working, family friendly arrangements for staff and six core principles it communicated to staff.
The report said that 78 per cent of staff agreed that their job was good for person growth, 89 per cent agreed that their manager shared important information with them and 97 per cent that the organisation encouraged charitable activities.
Chief executive Richard Fearon said: “I am tremendously proud of everything our colleagues have achieved – it’s their commitment that drives our success. This is very much their award and I look forward to celebrating it with them.”
Best Companies said that Dankse Bank created a collaborative culture where employees had a “true sense of belonging” and their investment in learning and development, wellbeing and digital tools.
Around 79 per cent of staff agreed that they were happy with their work-life balance, 97 per cent of staff agreed that the company encouraged charitable activities and 86 per cent of staff agreed that the firm was run on strong values and principles.
Caroline van der Feltz, HR director at Danske Bank UK, said: “It’s our people who make the difference, who help shape the culture and make this organisation a great place to work. I’d like to say thank you to all of our colleagues, both for their engagement in this survey and for their dedication and support through what have been a challenging few years supporting customers through a global pandemic.
“The real value of this survey is the feedback it gives us from our colleagues in terms of how they think and feel about their work and on areas like leadership, personal growth, wellbeing, and giving something back. The detailed feedback shines a light on the areas we’re doing well in, but also the areas in which we can do better.
She added: “We’re committed to helping our colleagues thrive and will be working closely with colleagues right across the business to develop action plans and help make Danske Bank an even better place to work.”
The Openwork Partnership
The financial advice company was praised for supporting is employees and multiple charities during the pandemic.
Its charitable arm, Foundation, had its grant budget raised by a quarter to £400,000 and raised over £18m for disadvantaged children and young adults in the UK and abroad since it was launched.
Carrie Morris, chief people officer at The Openwork Partnership, said: “Our colleagues are extremely important to The Openwork Partnership, and we are proud of everyone for pulling together and adapting so we continue to deliver results for our clients. We believe that everyone should be able to balance a successful career with their commitments and interests outside work and have created a flexible working culture for all employees to help deliver that.
“To see improvements across the board in all categories is a fantastic testament to the resilience and dedication of our people. We will continue to introduce a range of wellbeing and training programmes to ensure we deliver an open, collaborative, diverse and engaging environment for all our colleagues.”
The OSB Group, which owns Kent Reliance for Intermediaries, Precise Mortgages and InterBay, has created a “culture that encourages personal growth and offers people opportunities to learn and improve”.
Best Companies pointed to monthly mandatory training sessions along with workshops, training and employee support. As well as a diversity and inclusion group.
Around 89 per cent of staff agreed the organisation encouraged charitable activities, whilst 74 per cent of staff agreed they were happy with their work-life balance and 84 per cent of staff agreed that their manager shared important information with them.
The OSB Group was contacted for comment.
Best Companies said UK Finance was “committed to providing a supportive working environment” and staff had access to a wide range of health, wellbeing benefits and services.
It also has hybrid working, a colleague forum and active social committee that organizes charitable and social events.
Nearly all, 93 per cent, of staff believed they could make a valuable contribution to the success of their organisation and 89 per cent said their team was fun to work with.
David Postings, chief executive of UK Finance said: “I am delighted that UK Finance has been named one of the best large companies to work for in the latest Best Companies results. This is a wonderful testament to the hard work of all colleagues here at UK Finance and we look forward to building on these positive results throughout 2022.”
Best Companies pointed to Simply FM, which is a live weekly broadcast that chief executive Rob Grimshaw gives the firm, where music, business updates and employee shout outs are given. Staff can also interact with the live stream.
The conveyancing firm also permits remote working, with 90 per cent of the firm now working this way and there is a focus on training and development.
Around 64 per cent of staff said they were happy with the work-life balance, 87 per cent said that their team went out of their way to help and 82 per cent staid their manger was open and honest with them.
Simply Conveyancing was contacted for comment.
Teachers Building Society
The society was praised for its clear mission on supporting teachers, commitment to local communities and charities as well as employee wellbeing and professional progression.
All of staff agreed that the organisation encourages charitable activities, 98 per cent said that they believed it would make a valuable contribution to the success of the contribution and 84 per cent the experience gained from their role was valuable for their future.
Teachers BS was contacted for comment.
Twenty7Tec was lauded as a “forward-thinking workplace” that places the same importance on culture as business strategy.
It has launched Together@Twenty7Tec, which invites colleagues to become diversity champions, and runs activities like its The Apprentice and Easter egg hunts during the year.
James Tucker, founder and chief executive of Twenty7Tec, said: “I’m really proud of every single person at Twenty7Tec. Since our launch in 2015, we’ve been evolving and adapting quickly, putting our employees at the forefront of what we do and that’s exactly how we plan to continue.
James added: “We understand that it’s our people that make our company and we’re completely committed to building an inclusive and thriving environment for everyone. We aim to transform diversity and inclusion into more than just a box-ticking exercise, which is why this year we created Together@Twenty7Tec where we invite our staff to become diversity champions.”
Darlington Building Society
Darlington BS pledge to share five per cent of its net profits, its community and employment support and strong family culture were all cited as factors in its listing.
Additionally, its working remotely and quarterly Breakfast with the Exec and Lunch with Board gives employees direct contact with senior leadership.
Andrew Craddock, chief executive of Darlington BS said that to be name nineteenth best mid-sized company to work for in the UK was a “fantastic achievement”.
He added: “We truly value our staff and strive to provide the most productive work environment for colleagues to thrive in personally and professionally.
“Often, we do all of this under the premise of business as usual. However, with such a fantastic accolade to share, now is the time to highlight everything that comes together to make Darlington Building Society such a special place to be a part of.”
Marsden Building Society
The mutual’s equality and diversity development programme and its bespoke development programme were praised by Best Companies, as it encouraged diversity and inclusion, personal growth and training.
There is also further external training available on a wide range of topics such as self-awareness, leadership and management.
Around 73 per cent of staff agreed that the company had a strong social conscience, 87 per cent were proud to work for the organisation and 85 per cent were happy with their work-life balance.
Marsden BS was contacted for comment.
Vida’s aim to help those who fall outside the criteria of mainstream lenders and dedicated staff were cited as reasons for the company’s listing.
Around 86 per cent of staff agreed that their manager shared important knowledge and information with them, 79 per cent of staff agreed people in my team went out of their way to help them and 67 per cent of staff agreed their organisation has a strong social conscience.
Anth Mooney, chief executive at Belmont Green & Vida Homeloans, said: “Our people are our most valuable asset and we are blessed with an incredible team of talented individuals. As a business we make it our mission to ensure we create the best possible environment for them to be challenged, develop their careers, have fun and thrive.
“As we are constantly evolving our business, we want our staff to feel empowered and be part of the change, so we provide an environment where they feel they can make suggestions and share their ideas and concerns.”
He added that following its involvement with Best Companies last year it had introduced culture champions, focus groups and improvements to its workplace.
The software firm has undertaken multiple measures to support its employees mental and physical wellbeing and charitable activities.
Its Bewell@PSL site offers employee assistance programmes, fitness programmes, health-related flexible benefits, and access to lifestyle and skills development e-learning.
Phoebus Software’s (PSL) sales and marketing director Richard Pike said: “This recognition reconfirms that fundamentally we are an ethical business that understands our staff are a major asset and accordingly we look after them as well as possible.
“We believe that a great, motivated workforce will deliver exceptional customer service and this is reflected in our major success and growth over the years. Client feedback reflects this also. We are very proud of our people and our clients, and will continue to do everything we can to make PSL an organisation that people want to work for, and backed up with fantastic technology, that clients want to work with.”
Kate Langton, chief people officer at PSL, said: “When we got the news last week, we all came together to celebrate our position on the league tables. After a uniquely challenging couple of years, for everyone, it was lovely to get together in person and celebrate.
“PSL is growing and our standing as a great place to work in technology and also within the UK is testament to our fantastic people and we look forward to more talented people joining our team in 2022.”
Vida to create specialist relationship teams
In a change designed to bolster the intermediary experience, the teams would work with clubs, networks, specialist distributors, and new builds, Vida said.
In addition, Vida said it had added a key account manager (KAM) finder which allows brokers to find and contact their local KAM directly.
Richard Tugwell (pictured), director of mortgage distribution, said Vida was “proud to continue to evolve our proposition and meet the complex needs of brokers and their clients”.
He said the company has “put time and resources into ensuring our relationship teams can provide packagers, panels and brokers with a first class service and be able to accommodate their needs every step of the way. It also reinforces our commitment to offer greater opportunities for intermediaries and their clients who are locked out by the high street lenders”.
Vida brings out limited edition resi and BTL products
The lender has added four products to its residential range, available for home movers, remortgagors and first-time buyers.
This includes its two-year fixed rate Vida 48 product, which is available up to 90 per cent loan to value (LTV) at a rate of 3.99 per cent. It will also offer a fee-saver product up to 90 per cent LTV with a rate of 4.49 per cent.
Its Vida 36 core product, also on two-year fixed rate term, is available up to 90 per cent LTV with a rate of 4.39 per cent.
The lender has also brought out a fee-saver product at 90 per cent LTV with a rate of 4.89 per cent. The fee-saver version offers free valuation and £250 contribution towards legal fees, paid within 30 days of completion.
Vida has also added limited five-year fixed rate products to its BTL range for purchase and remortgage.
This includes a fee-free 75 per cent LTV product with a rate of 3.19 per cent, as well as a standard BTL product at the same LTV tier with a rate of 3.04 per cent and a fee of £1,495.
It has also introduced a houses in multiple occupancy (HMO) product at 75 per cent LTV with a rate of 3.19 per cent. This is subject to a £1,995 fee.
Richard Tugwell (pictured), director of mortgage distribution at Vida, said: “As a lending specialist we are constantly assessing the market, monitoring demand and looking to ensure we are always providing a first class service and enhancing our offering.
“We are dedicated to supporting under-served borrowers and making homeownership more widely accessible. Our new product launches today are another step in achieving this, and we’re confident that these offerings are a great solution to help borrowers who are cut out of traditional high street lending.”
The lender has made other changes to its offering, including the expansion of the list of countries accepted in its expat range, creating a bespoke key worker product, extending its Help to Buy range and making 90 per cent LTV mortgages available on all houses and flats.
It has also made three hires to its sales team, including Helen Cawthra as its corporate sales manager, Andy Alvarez as its national sales manager and Scott Phillips as specialist distribution manager.
The company is also understood to be working on a banking licence application and is in the early stages of working with the Prudential Regulatory Authority.
MBT adds Vida to affordability platform
MBT said it welcomed the addition of the lender to its affordability research platform.
Vida Homeloans specialises in complex mortgage cases and uses cutting-edge technology to deliver what it claims is an efficient and differentiated customer experience. The lender has 270 products, across residential, buy to let, houses in multiple occupancy (HMOs), multi-unit blocks, flats above commercial properties and expat investors.
MBT Affordability provides brokers with a calculation of how much their clients can borrow. It features a panel of more than 40 residential and 66 buy-to-let lenders, based on affordability and criteria; results are delivered in under a minute, with no approximations or estimates.
Tanya Toumadj (pictured), chief executive at MBT, said its data showed that even lenders rated highly on their affordability criteria were not always among the top 10 lenders when a more in-depth search was carried out.
She said: “It’s really important for brokers to carry out extensive research to ensure they are able to identify the most suitable solution for their clients.”
“The easiest way to do this is to use the technology platform with the most extensive panel in the market and at Mortgage Broker Tools we are committed to continue to deliver just that. This integration with Vida adds new affordability options for brokers and their clients, and will be particularly useful for customers with low credit scores and complex incomes.”
Richard Tugwell, director of mortgage distribution at Vida Homeloans, said the integration with MBT Affordability was an important step for Vida.
He said: “Unravelling complicated situations and helping customers often ignored by high street lenders, is an important element of our proposition.
“MBT provides an invaluable tool for brokers to help them understand which lenders offer the best affordability options for their clients. This is particularly useful for customers with complex income as there is a large variance in the loan sizes available to them and specialist lenders, like Vida, can often provide the most suitable solution.”