Foundation enters packager agreement with Y3S Bridging & Commercial
Through this agreement, Y3S B&C will be able to provide fully packaged cases across the Foundation’s full range of buy-to-let products.
Grant Hendry (pictured), head of national accounts at Foundation Home Loans, said: “There is a growing level of complexity in the specialist buy-to-let sector and Y3S B&C are both highly experienced and offer a range of benefits to their introducers which ensures all stakeholders receive an excellent service.
“We’re looking forward to working with the Y3S B&C team and helping them and their introducers understand the many product opportunities that Foundation can offer in this key sector.”
Andrew Gage, managing director at Y3S B&C, added: “We are looking forward to forging a strong relationship with the Foundation family. The products available with Foundation will give even greater choice for our intermediaries and clients alike.”
Bridging volumes flat in Q2 as LTVs and rates rise – MT Finance
The average loan to value rose to 52.85 per cent, up by 1.55 per cent and the average monthly interest rate was 0.79 per cent, a raise of 0.05 per cent.
Investment property purchases remained the most popular use of bridging loans for the second consecutive quarter, comprising 25 per cent of lending, up from 22 per cent in Q1.
Bridging Trends collated lending figures from MT Finance and specialist brokers Brightstar Financial, Clever Lending, Complete FS, Impact Specialist Finance, Positive Lending, Pure Commercial Finance, Y3S and UK Property Finance.
Chain-braking was the second most popular use of bridging in Q2, at 18 per cent of lending.
“I’m not surprised that chain-break finance was the second most popular reason for obtaining bridging finance,” said Impact Specialist Finance managing director Dale Jannels.
“We’re in uncertain times and this uncertainty transfers into property transactions, short-term finance might get a deal over the initial line.”
Longer to complete
Business purposes comprised 12 per cent of all bridging loans in Q2, up from eight per cent in Q1.
The number of regulated loans fell to 37.5 per cent, down 2 per cent.
Second charge loan transactions grew to 18.7 per cent, up 2 per cent.
The average term of a bridging loan remained at 12 months for the third quarter in a row and the average completion time rose by four days to 44 in Q2.
Are second charge master broker fees still too high? – Marketwatch
At The Specialist Lending Event, Brightstar Financial CEO Rob Jupp noted that fees had fallen 30-40% since the implementation of the Mortgage Credit Directive (MCD).
However, the Financial Conduct Authority’s (FCA) review of second charges has once again turned the spotlight on the sector.
So this week, Specialist Lending Solutions asked its panel whether second charge fees were still too high?
Jane King, mortgage adviser at Ashridge Private Finance, says the level of master broker fees has put her off referring clients for second charge products.
Matt Cottle, CEO of Specialist Mortgage Group, argues that first and second charge mortgage broker fees are not comparable.
Sebastian Riemann, mortgage consultant at Libra Financial Planning, believes master broker fees do not meet the regulatory objective of treating customers fairly (TCF).
Jane King, mortgage adviser at Ash-Ridge Private Finance
As any adviser who is classed as independent knows, they must consider the merits of a second charge loan when advising clients looking to raise capital.
I have found myself in this position many times and often it is not appropriate to remortgage due to early repayment charges on the clients existing mortgage, or for a myriad of other reasons.
When this happens my heart sinks as I know that now I am going to have to consider a second charge loan which means I am going to try to explain away the exorbitant cost of such an arrangement even though I do not charge any added fees myself as I just cannot justify any further cost.
I am at a loss to know why packagers charge thousands of pounds for packaging these loans and until this situation changes I am finding it almost impossible to recommend such an arrangement to any of my clients and we generally only proceed if the requirement for funds is urgent and there are no possible alternatives.
I look forward to the FCA review on this and would like to hear from a master broker who feels that they can justify these fees.
Matt Cottle, group CEO of Specialist Mortgage Group
My industry colleagues do an excellent job of expediting difficult cases and getting clients the money they need.
I do not think that master broker fees are too high. Commission paid by lenders is only sufficient to cover a portion of costs, we have to charge broker fees to survive. The average Y3S Loans broker fee is 5.5% of the loan advance.
We operate a very strict broker fee policy to ensure that customers are not over or under-charged. First charge and second charge mortgage broker fees are not comparable, the basic reasons for which are:
- Second charges have smaller balances than firsts; a 5% fee on an average £50,000 second charge is equivalent to a 1% fee on a £250,000 first charge.
- There is almost always at least one problem with a second charge loan application; it takes a lot more time to package a second charge than a first. A second charge application is a specialist product and almost all mortgage brokers pass it on rather than tackle it themselves.
- First charge brokers expect the client to pay for every part of the application. Second charge brokers almost always pay for every part of the client’s valuation (average £350), mortgage reference from the first charge lender (average £85), searches, document couriers to expedite the application (£180); everything is covered by the broker.
- The customer can pay up front but 99% choose to add the fees to the loan. If the application cancels or declines, the packaging broker loses out. Most first charge broker are unwilling to pay out on all fees, but with second charge brokers it’s an expected part of the process.
- First charge mortgage brokers are the single most fruitful source of leads to second charge brokers, and rightly, they expect to be remunerated. At Y3S Loans the average broker commission in 2017 was £1,096. If the client prefers not to pay this up-front then the broker’s commission has to be included as part of the fee.
Speaking only for Y3S Loans, there is less than 20% profit left over once all packaging fees have been paid, and that does not take account of any abortive costs.
Sebastian Riemann, mortgage consultant at Libra Financial Planning
Fees on second charge loans have significantly changed since they were brought under the remit of the FCA, and rightly so. There should be no difference between the first or second charge lending models, besides the pricing of interest rates.
The process should be the same where brokers are able to utilise packagers or approach lenders directly. This direct to market access seems to lag a little and there can be great benefit from using packagers as well, so there are varying models and the regulator does encourage that a one size does not fit all.
But there is a distinction between offering exceptional service and being unreasonable and this is really where the second charge loan industry has had a bad name in the past.
I have viewed second charge loans as a last resort or inferior option largely due to the high interest rates and large up-front charges by secured loan brokers and/or packagers – often ranging between 5% and 10% and which significantly increased the amount clients had to repay over the loan. Furthermore the market was not regulated in the same manner as the first charge market, quotes often changed from first enquiry to when the offers arrived and many additional fees were chargeable at the point of application. It just never seemed as reliable.
One of the key principles that has shaped the first charge market has been Treating Customers Fairly (TCF). While not a strict set of rules per se, it offers very clear guidance on what we should be doing and keeping the client outcome at the forefront of all transactions.
I have never supported a fee cap or for the regulator to set out an advised fee scale, mostly due to firms costs and demographics varying vastly in different parts of the country.
However we should be paid fairly for the work undertaken and in some instances this would be more extensive than others. Similarly I have always considered that a 1% fee is a large amount and would act as a maximum as I cannot envisage an application to warrant more work than this under any circumstances. I have several instances with cases stretching over several years with private banks and specialist lenders, but this still hasn’t warranted higher fees. It is of course reasonable that a firm covers their costs and makes a reasonable profit so that we can continue to provide a much-needed service.
So why have second charge packagers felt the need to charge 10%? The only answer I have received which appears sound is simply that they got away with it and the clients accepted these. That doesn’t make it right however, nor is it treating anyone fairly. The fact that many clients are not aware of other alternative options and possibly feel embarrassed by having fallen on hard times, does not warrant them being taken advantage of.
So what would be fair? For second charge loans to be treated the same as first charge loans and the clients to benefit from having an alternative funding option that is fully protected and regulated. There may will be some that charge more and some that charge less, but these fees must be reasonable in all instances.
Y3S opens Northern office
The new office will be staffed by Thomas Wall, Steve Corns and George Tuffin.
Barney Drake, COO at Y3S Group said: “At a time when the industry is struggling to grow business volumes, Y3S is satisfying increasing demand for its own products and services through the addition of strategically placed satellite offices, the first being in Manchester. We see huge benefits for our broker introducers in being localised and this dovetails with our fleet of document couriers who can service clients anywhere in the UK in a few hours.”
Thomas Wall said: “Y3S has gained an enviable reputation in the second charge mortgage market for speed and quality of service as well as for sheer volume of business written. Marrying our brokering skills to Y3S’s slick systems and processes will produce a new addition to the Northern Powerhouse.”
Y3S acquires 50% stake in broker Pink Pig Loans
The deal was the result of an ongoing collaboration between the firms and will see Y3S provide a range of support to the brokerage to “facilitate fast growth”.
PPL currently offers second charge mortgages and bridging finance solutions to mortgage brokers and IFAs.
Cardiff-based Y3S has made a number of acquisitions in the past five years in a bid to increase its marketshare.
The group now consist of Y3S Loans, Y3S Bridging & Commercial, Y3S Private Clients, Chaseblue Loans, B2B Financial and Pink Pig Loans, which together expect to generate £140m of second charge mortgages and £85m of bridging loans in 2017.
Y3S group CEO Barney Drake (pictured) said: “We’re very pleased to announce this latest deal with PPL. MD James Rainbird is a good friend and we have worked in collaboration for many years, so this feels really natural for all of us. He has steered his business successfully through the recession and beyond and it’s now poised for the next stage of growth, which is where Y3S can add real value.”
Rainbird added: “Joining one of the most exciting specialist mortgage brokerages in the UK is an uplifting experience for the whole team at PPL. The support offered by Y3S has proven to be an excellent growth formula for its existing investments and I am very much looking forward to developing our business together.”
Second charge firm Y3S offers PI cover for ARs
The secured loan firm said many mortgage networks had not entered into any partnership agreements with specialist loan intermediaries, leaving ARs concerned about safely referring clients for second charge mortgages, fearing poor advice may come back to haunt them.
Matt Cottle, joint CEO of Y3S, said: “We’ve brokered thousands of secured loans for the clients of ARs and we speak to hundreds of these guys every month, so we get a very real and rounded view of what’s going on. With the advent of MCD [Mortgage Credit Directive] almost upon us, ARs are confused about what’s wrong and what’s right. Many believe that they must use their network or nobody at all, but in fact the reality is quite different; most mortgage networks are stacked with other priorities and happy for their ARs to find their own solution.”
Joint CEO Barney Drake said some mortgage networks specify that ARs must use a named packager in order to receive their kickbacks, but they speak to ARs every day who are unwilling to change long-standing relationships with loan packagers, irrespective of the wishes of their network.
“Those ARs that speak out are being given the green light by their network to go their own way despite the contractual obligations imposed upon them,” said Drake. “Our PI cover provides a safe haven to every AR in the UK. They don’t need the extra hassle of wondering if they are doing the right thing by their client, we’ve taken care of it for them.”
Freedom Finance gets FCA authorisation
Second charge mortgage brokers were previously authorised by the Office of Fair Trading and needed a Consumer Credit Licence to arrange loans.
When the European directive was ushered in, to take effect from 21 March 2016, brokers advising on second charges were required to upgrade to full mortgage permissions to match their first charge counterparts or cease offering the service.
The EU does not differentiate between mortgages and second charges, more commonly known as secured loans, which means that all brokers will be required to be CeMAP qualified by 2017.
Rivals Enterprise Finance and Y3S have both been awarded full mortgage permissions ahead of the MCD deadline.
Y3S receives full FCA authorisation ahead of MCD deadline
The news follows an announcement from Enterprise Finance earlier this month that the broker had received approval from the FCA to advise on regulated mortgage contracts.
Changes brought about by the MCD will see second charge mortgages regulated in the same way as first charges, meaning secured loan brokers will need to be fully authorised to offer advice.
Joint CEO Barney Drake (pictured) said: “We welcome full authorisation and the imminent implementation of the MCD which will help to bring second charge loan products into the forefront of broker’s minds. As a second charge can often be a better solution than a remortgage, this can only be a good thing for their clients.”
Rhys Thomas, compliance director at Y3S, said: “Over the last year or so we have been gearing up for the regulatory changes that we face. To have gained full FCA authorisation is recognition of our ongoing commitment to ensure that the policies and procedures that we have in place will continue further drive up standards for the protection of our introducers’ customers, meaning the best possible outcomes are delivered.”
Y3S buys 50% stake in rival second charge firm
Y3S said the acquisition is part of a buy and build strategy and will help accelerate the group’s growth.
Chaseblue, like Y3S, is a secured loan packager for mortgage brokers and IFAs, providing bridging and commercial finance options for clients of its financial intermediaries.
The new corporate structure will account for £6m of second charge loan completions per month, introduced purely through intermediaries.
Barney Drake (pictured), director of Y3S, said: “We were attracted by the promising growth of Chaseblue under the directorship of Ben Gillespie which fits into our portfolio and growth strategy. We are looking forward to progressing our expansion plans by working closely with the superb team at Chaseblue”.
Gillespie said the opportunity made ‘perfect sense’ for Chaseblue and allowed it to draw on the expertise of ‘the biggest B2B broker in the market’.
Precise Mortgages slashes seconds rates and confirms master broker panel
The full list of Master brokers includes:
• Brightstar Financial
• Enterprise Finance
• Fluent Money
• Norton Finance
• Positive Lending
• Promise Solutions
• The Loans Engine
• The Lending Wizard
• Loans Warehouse
• V Loans
• Y3S Loans
The lender has also cut its prime rates by up to 2.25% to start from 4.45% and reduced its product fee to £495 from £995.
Rates on near prime have also been cut by up to 3.25% and now start from 5.45% plus Bank Base Rate each year.
Simon Carr, director of second charge lending for Precise Mortgages said: “Second charge loans are now regulated by the FCA and we are not only leading the way on responsible lending but also launching market leading products so that brokers can offer their clients an even better solution.”
Steve Walker, director of Promise Solutions, said: “The latest products really tick the boxes for brokers, networks and consumers and offer a market leading combination of rates, low fees and choices of tracker or fixed rates. As brokers and networks align their loan sales process closer to how mortgages are sold, loans from Precise Mortgages will be the natural choice in most cases, especially as the new criteria will result in significantly more clients qualifying for the excellent rates on offer.”
Marie Grundy, operations director V Loans, Association of Finance Brokers representative and AMI Board Member, said: “The second charge market is becoming increasingly competitive and the latest rate reduction from Precise Mortgages is a strong example of this.”
She added: “In addition, we are seeing an increased demand for fixed rate second charge products and the inclusion of two and three-year fixed rates within their product range will ensure there is increased choice for borrowers who wish to have peace of mind with a monthly fixed payment.”