To assist advisers, Mortgage Brain developed a cost column to show the cheapest deals in compliance with this guidance, suggesting a need to point brokers in the right direction.

So this week, Mortgage Solutions is asking: Do you feel confident that you can accurately give advice to comply with the FCA’s cheapest rule?

Andy Wilson, managing director of Andy Wilson FS

It is now relatively easy to identify the cheapest mortgage product for a given set of requirements.

The sourcing platforms and criteria filter applications all combine to provide advisers with powerful research tools. However, an adviser’s experience and knowledge of the real lending world can play just as much an important part of the advice process.

Quite often, there are very good reasons why certain situations lead the adviser to some other product.

How flexible is their underwriting on properties that have some issues – asbestos, flood risks, short leases or high rise flats? What is the service of a particular lender like?

Once you have used plenty of filters to find the lowest overall cost product, you can then add what you know about a lender’s service.

The Covid crisis has compounded some of the potential servicing issues for lenders, with many staff working remotely, and all of the communication issues that brings. Can you actually talk a case through with them quickly and easily? Can they get an urgent case through quickly?

Another factor that Covid has brought into focus is whether the applicants will still be working or have the same decent incomes when their new mortgage product ends. If not, what will their options be if the lender has a high standard variable rate?

Do they offer decent products to transfer to internally? Will they be competitive? Historical lender knowledge plays its part here.

Many borrowers cannot see beyond a few years and consider what their lives will be like, but advisers know the effects of difficult life changes.

The ‘cheapest mortgage’ requirement does not insist that only the cheapest mortgage is the best solution to a client’s needs. Instead, it only requires the client to be given an explanation as to why an alternative ‘cheaper’ product has been recommended.

Usually, this is easy to do and justify.

Rachel Dixon, mortgage adviser at RH Dixon 

I’m with Sesame so I’ve been using Mortgage Brain’s cost column for a while. I know it works differently than it does for directly authorised firms because we have to recommend the cheapest mortgage from the FCA column. 

We are able to reject that, as long as we have a reason why we’ve rejected it and chosen something else. We’ve always done it.  

Sesame have had it up and running for going on two years. We were made to do it on the basis that it would come in, so Mortgage Brain was always set up for that, they’ve just slightly tweaked it now. 

Something came up the other day which I thought didn’t look right. I don’t know what happened in the end and it seemed to sort itself out, but it is pretty simple. 

Because I’ve been doing it for so long I don’t have any problems but you’re more likely to have DAs recommend certain lenders whereas under a network we’re always reviewing our work. 

It was an easy transition to start looking at the cheapest mortgage based on overall cost over a specific time, especially when I’m using the system. We can still use our discretion we just have to have a plausible reason why a certain lender or mortgage has been discounted. 

Adam Wells, co-founder of Lloyd Wells Mortgages

As part of our appointment with our clients we will always ask what their priorities are.

For some, that may be the lowest monthly payment, for others it will be the least amount of fees, or it might be the overall cost over the initial period.

As long as we are doing our job and finding out what is important to the customer, we are confident we will always comply.

I feel that the rule does leave room for error, however. If you are applying for a mortgage and adding the fee to the mortgage, you’re still paying that fee.

Part 3ii of the rule states ‘includes any product fee or arrangement fee if the customer proposes to pay that fee directly rather than add it to the sum advanced under the contract’. Why are we not taking fees that are being added on to the mortgage into consideration?

The rule has not made us change the way we search for mortgages as we find out what our customers objectives are and advise them accordingly.

Mortgage Brain’s partnership with Sesame with be a helping hand for many advisers, but it isn’t necessary. If you are qualified to give advice on mortgages, it is your job to understand the regulations.

David Hollingworth, associate director of communications at L&C Mortgages

Most advisers will be very aware that the cost of a mortgage will typically be high on a priority list for any borrower.

If you asked most people what kind of deal, they want they’d be highly likely to say that they want the cheapest before then delving into the wide range of product options on offer.

As a result, I think that it’s always been impossible to divorce the search for a mortgage from the price on offer and this is therefore not something that will be alien to advisers.

In fact, demonstrating to customers how one product may prove to be cheaper than another when factoring in other costs will be second nature to advisers and only helps to underline the value that a broker adds.

It’s also of great value and standard for most to be able to build other factors into the equation, including service and criteria elements that will clearly have an impact, depending on the personal circumstances of the borrower.

That can clearly remain part of the recommendation but will require the correct record keeping to identify the reasons that may have made a slightly more expensive deal the more suitable option.

This approach will not be new for many but the development of tools in sourcing systems will of course help ensure that the right detail is kept to back up the product choice and assist the record keeping as well as offering a consistent approach.

This week’s comment was in response to the article: Accord’s Duncombe on 90 per cent lending, capacity – and the cliff edge that worries him 

Stuart Phillips said: “I don’t really understand why lenders won’t use price to manage service levels. 

“Lenders have been complaining for years about making no margin and have been managing affordability based on much higher interest rates anyway.” 

Phillips added: “An increased rate on 90 per cent products sends a clear message to clients about the risks involved and allows them to make informed decisions about whether to proceed, either by borrowing less, buying lower value homes or increasing loan terms.  

“I think most clients would appreciate being able to make that choice themselves rather than blindly rolling the dice and creating this feeding frenzy?” 

Recent changes to the Shared Ownership initiative include the reduction of the minimum share from 25 per cent to 10 per cent, possibly giving those who saved enough for the Help to Buy scheme another route to purchase. 

So, this week, Mortgage Solutions is asking: ‘Do you think the shared ownership changes will be an effective alternative for those who benefitted from or preferred the Help to Buy scheme?’ 

Kelly McCabe, managing director of The Mortgage People 

I don’t think the changes affect that; I don’t think the two are linked.  

Help to Buy and shared ownership have always sat comfortably alongside each other and served different purposes, but I don’t think the changes have been geared up to affect that. 

They don’t do enough to make any difference.  

Shared ownership and Help to Buy are for different people. If you qualify for shared ownership you wouldn’t be able to buy a Help to Buy and if you can afford a Help to Buy you shouldn’t be looking at shared ownership. 

There’s a small crossover but overall, it’s two different purchasers. 

It can serve Help to Buy people, but it will only be towards the higher end of purchases.  

The differences between the two is shared ownership goes through much more rigorous testing. The affordability checks that are done mean that shared ownership is tailored to each individual purchaser. Whereas Help to Buy has always been a builder-led scheme if you can afford it. 

Generally, shared ownership might be able to pick up where Help to Buy has left off especially if there is a natural rise in the market. But it will mostly help cash purchasers. 

If we don’t specifically focus on the changes, then it can step up and fill the gap in some way. 

Rupi Hunjan, CEO and founder of Censeo Financial 

Shared ownership has been around for a while; Help to Buy came in after the credit crunch to help builders and the government underpinned the scheme. 

People who come into Help to Buy typically aren’t in the affordability bracket but those in shared ownership are. 

On an equal position, if they can’t afford Help to Buy and put down five per cent, the salary multiples won’t work so they could to go for a shared ownership instead. 

The changes to allow a lower share would invite more people into the shared ownership tenure. Whether or not it works is yet to, be seen. The devil is in the details.  

We need to know how many people would be able to put in a lower share because the housing association could very well ask for more otherwise it won’t work for them commercially. 

But with the changes to Help to Buy coming in in March, those looking at Help to Buy will begin looking at shared ownership which to be fair, they are already doing. 

My worry is whether purchasing a 10 per cent share in a property work would for a developer or housing association to make it a viable scheme, especially in London.

However, depending on the grant subsidy the government offers developers, it might be possible. We’ll have to wait for the details. 

John Doughty, financial services director at Just Mortgages New Build 

Anything that helps more people to own their own homes is a positive.  

Shared Ownership is definitely rising up the agenda for us, and we’re dealing with a lot of first-time buyers who are looking at this as a way to get onto the ladder. 

I don’t really see this as an alternative to Help to Buy as the two schemes are targeting different types of buyers. This will work for those on low incomes, but shared ownership is not the same as full ownership and this is what people using Help to Buy want. 

The restrictions on Help to Buy that are due to come into effect next year will affect people further up the income scale, and they will not for the most part be looking at shared ownership as an alternative. 

Reducing the minimum stake to 10 per cent will encourage a lot of people, who may otherwise have thought home ownership was beyond their reach, to think about taking that first step. Cutting the deposit they need by more than half will clearly make this much more affordable. 

But reducing the minimum stake is only one piece of the jigsaw. They will still need mortgage finance, so lenders also need to step up and make the right products available to support shared ownership. 

It’s important also to remember that a smaller initial stake means the ongoing rental payments will be larger.  

Borrowers need to be sure they can afford the combined rent and mortgage payments, and also to be clear about where the responsibility for maintenance and repairs lies. 

The first comments were a response to the article: TSB launches 90 per cent LTV mortgages for one-day only 

Stuart Phillips said: “What they are offering is a prize draw, a raffle. Like this is some silly game. 

It’s not a silly game, these are young people’s hopes. Something they have likely saved for over years, now scuppered by a virus they didn’t see coming.  

“Now reduced to a lottery.” 

He added: “Not to mention the frustration for the broker, having to tell clients they will roll the dice, creating stress and forcing hundreds of brokers to commit to work they know there is only a fractional chance of getting paid for. 

“If you haven’t got the cash or the capacity, stay out of the market until you do.” 

Aga Moczynska said: “As much as would really love to see more high loan to value (LTV) deals returning to the market, moves like this are far from desirable.  

“It’s not fair on clients or brokers. All it creates is a race for those deals creating a lot of pressure for all parties.”  

“What is the point of bringing a deal for one day only and what purpose does it serve? There are a fair amount of clients waiting for 90 per cent LTVs to become available but in many cases a broker would require a fresh set of documents before submitting the business.

“With one day’s notice on a one day deal I can only imagine what things are going to look like,” she added. 

High LTV shortage affecting all borrowers 

Replying to the article: Brokers see tough first-time buyer mortgage market unless more lenders return – analysis, Sox said: “It’s not just first–time buyers. A couple that have parted recently have sold but now only have a small deposit each.  

“I have high earning clients who have been left out of the loop because the maximum purchase price or loan size is too low for what they need, so the list goes on.” 

They added: “If the first-time buyers cannot enter the market then there cannot be onward movers and eventually it will grind to a halt.  

“I can’t see it getting better anytime soon, unless a few of the larger banks get together and all agree to come back to market at the same time with similar placed products so they can all take a share to spread the risk.  

“At the rates they are charging they must be itching to do it surely.” 

Along with Brexit and the end of the furlough scheme, the stamp duty holiday is winding down and the Help to Buy scheme is transitioning to just first-time buyers; the impact of these events on the mortgage market is still unknown. 

So this week, Mortgage Solutions is asking: What market scenarios are you preparing your business and your clients for over the next six months? 

Pete Mugleston, director at Online Mortgage Advisor 

I can’t remember a time where there’s been so many things pulling the industry in different directions – from payment holidays and furlough, to the online shopping boom and eye watering property prices. 

Little of it, good or bad, is reliable or predictable and whilst we don’t know what to expect we’re certain that to survive retaining cash will be crucial. 

As a business we’re in a strong position, having been back at the coalface and had insights I wouldn’t swap for anything. Every penny counts, and we focus on the quickest, low cost wins and shelve the big ideas for another day.  

If we can’t justify a return, we don’t make the investment – that’s true of both time and money. 

For our customers, I wouldn’t change my advice: Live within your means, get all the protection you can afford, and do what you can to be relevant and useful. 

I commented on a LinkedIn post recently where a broker ‘advised’ their customer not to buy, certain that property prices will drop.  

I found this odd, not just because they showed no credible evidence of a crystal ball or because they were talking themselves out of business, but because they were so happy to offer ‘advice’ they were dangerously unqualified to give.  

Whether one can accurately predict how, where and when prices will drop, or not, advisers need to be clear on their role in the industry and stay in their lane. Consumers need us now more than ever. 

Saira Haider, senior finance and insurance consultant at Mansion Mortgages 

I am preparing my clients for a slight drop in price in some areas, but also advising them to buy, especially as I own a property in Swanscombe that was issued with a potential compulsory purchase order from the upcoming London Resorts theme park.  

So, I am preparing clients to buy property in the nearby area as potential holiday lets for the future.   

I find that first–time buyers are still around but not as much as the investor who wants to draw funds from properties to buy.  

I’m not in the 90 per cent market, but I cannot see how a lender can issue a five-year fixed 90 per cent loan to value product with a high rate. Is this not exploitation?  

If I were advising on this I would not be urging clients to take these mortgages, instead they should borrow the difference if at all possible and have the bulk of the loan on a lower rate.  

Lenders are definitely tightening up. Barclays who were the leader of higher income multiples has now updated its multiples with 4.5 being the highest, so it seems as though they are slowing down too.  

Lenders also seem to be stalling issuing offers but we are still seeing clients coming in on the frontline so it would seem the wheels are still in motion. 

So, I’m proceeding as normal and remaining cautious and keeping a close eye on things in the coming months. 

Akhil Mair, managing director at Our Mortgage Broker 

As an optimistic but realist team of experienced mortgage brokers, in response to coronavirus, we created a business plan in the midst of lockdown. 

We anticipated volatility in unemployment, a reduction in property prices and further due diligence by banks and lenders.  

We also planned how we would remotely work with our clients and what our approach to an increase in mortgage rates would be.  

With experience and the effects of the 2008 recession, comes the knowledge of what to do and what not to do.  

Since March we have made it a point to contact all of our clients to provide them with relevant advice and how best they could consider any purchase and remortgage plans they may have for the remainder of 2020 and going into 2021.  

As a business, we have set up zoom meetings, a dedicated WhatsApp line and seven-day, 9am – 9pm business openings to ensure our clients can contact us to discuss any property finance matter.   

The first comment was from Arron Bardoe, replying to the article: Barclays cuts LTI for all cases not at offer.

Bardoe said: “While many of us are beyond disappointed, there is only one reason Barclays will have taken this decision. 

“About six years ago, larger lenders were limited to not have more than 15 per cent of the loans above 4.5x income. I suspect Barclays has just realised it is on the cusp or has exceeded this threshold. 

“Historically, Barclays backbook was low loan to income (LTI), so it was able to freely continue above 4.5x since the rule change.” 

He added: “Continuing lending would put it at risk of regulatory fines, which I guess is a great deal more expensive than paying customer complaints. 

“Nonetheless, there should be an exceptions policy as it should also remember it must Treat Customers Fairly (TCF). Would the fines for breaching the lending limits exceed the fines for failing TCF?” 

“An example is a client of mine where we have been trying to submit a further advance application for six weeks. Due to technical glitches and errors by Barclays, this case is still to be submitted. His case should have been offered but will now be declined.  

“He will need to pursue a secured loan and register a complaint for the additional costs. As all the delays are due to Barclays, I would argue this should be an exception,” he continued. 

He added: “Nonetheless, I bet I am going to have a better day than the Barclays’ business development managers (BDMs) today, so let us all try to remember it is not their fault when we call them today.” 

Government help needed 

The second comment came from John Azopardi, in response to the article: HSBC withdraws 90 per cent LTV mortgages for new customers.

He said: “We are in desperate need of a government-backed mortgage guarantee scheme. The stamp duty holiday has been a great help but access to higher loan to value mortgages is key to the market operating properly.  

“Lenders are justifiably not prepared to take the risk they were a year ago.”  

He added: “If the government assumed the liability for loans over 80 per cent it may not necessarily cost them anything, but at the same time give the lenders the assurance they need to continue to support the market.” 

So this week, Mortgage Solutions is asking: Are you finding the cases that land on your desk are becoming more complex and as a result, are you making use of packagers? 

Nik Mair, director at London Mortgage Solutions 

We are experiencing cases with notable challenges.  

The central issues are stemming from the economic uncertainty caused by the Covid–19 pandemic which has affected many businesses and in turn, pushed the banks and building societies to alter their lending criteria.  

Government assistance has been invaluable to many businesses and employees. However, most lenders are either shying away from lending to employees that are still furloughed, or lending based on the furloughed income which in general is at a maximum of 80 per cent of their normal income.  

In the case of those who are self-employed, most felt an impact on their earnings during the lockdown and have also taken advantage of the opportunity to receive a bounce back loan from the government. 

Such individuals are now faced with stricter documentary evidence required by the underwriters who are naturally more discerning and risk averse.  

The minimum deposit required by the vast majority of lenders has also increased; 95 per cent loan to value (LTV) mortgages are a distant memory, and 90 per cent LTV products are very limited in availability. 

Equity release and second charges are becoming common solutions for those needing to release money tied up in their property to invest or simply stay afloat during these unprecedented times.  

The highly experienced team at London Mortgage Solutions are equipped with the knowledge, resource and support to adequately and successfully resolve the vast majority of these complex cases.  

We are utilising packagers where appropriate to ensure that our clients benefit from a solution that is the most suitable for their needs and requirements. 

Stuart Gregory, managing director at Lentune Mortgage Consultancy  

Being a broker is never simple.   

As an industry we have to adapt on a sixpence whenever the situation changes, and normally it’s a situation which is outside of our control.  

Whether it’s a pandemic, or changes in government policy thrown out to gain political capital and headlines, you can guarantee that whenever you think you know what you are dealing with, something will happen to send a curve ball into your world.  

So, the pandemic has seen a shift in enquiries combined with the stamp duty holiday – more enquiries for purchases with many seeking a holiday let property. Our August in 2020 was our busiest in years.  

For us, a complicated case means a standard case. Very little of our enquiries could be considered ‘vanilla’ – there’s always a complication involved.  

As a result, our work is always varied – if it wasn’t, then we wouldn’t be able to deal with the queries we have from clients, especially those who have made their own application elsewhere and been turned down.  

Items such as one year’s self employment and a minor – or major – credit blip in the past can make a difference to what can be achieved.  

Normally, what a client sees as standard is normally anything but. Occasionally, we’ll get a call once a deal has been struck and expected to work a miracle.  

We utilise our own knowledge together with strong lender relationships and software to produce quality results – we also use packagers where we seek a second opinion.  

As a broker, you never ‘know it all’ – those who claim to are lying. 

Adam Wells, co-founder of Lloyd Wells Mortgages 

To be honest, all of the cases we deal with are quite complex.  

That being said, this week I’ve had a client who is looking to staircase out of shared ownership property, as well as a client with significant debt looking to sell their home and purchase their next home with the Help to Buy scheme. 

We also have a landlord looking to remortgage his home and one of his buy-to-lets to raise money to purchase his sister’s property and turn that into a buy-to-let.  

I would say that most of the complexities come from clients looking to do weird and wonderful things.  

With everything that has happened this year, clients are trying to be creative to make their money go further and their mortgages more affordable.  

We don’t refer anything on to third parties as we are the experts and if we can’t do it, then we’re confident that no one can.  

My experience of packagers is quite negative, and they often don’t offer clients the same service that I offer them and don’t have the levels of experience I have.  

I’m sure packagers are useful for brokers who deal in volume and would rather pass the cases onto someone else rather than complete the research themselves.  

Our philosophy is that there is a mortgage for everyone, and it’s up to us to find out which lender is able to help. 

Bank of England data shows house purchases were at the same level as last July and anecdotal reports suggest August continued to be busy.

But taking a break from the pressures of work is essential and especially so during this unusual period.

So this week Mortgage Solutions is asking if you managed to fit in some time away from work during the summer?

Did you take a summer holiday this year?

Yes, as normal

Yes, but a shorter one

No, I was just too busy

No, Covid restrictions meant I couldn’t go away

No, didn't want/need a break

• Yes, as normal
  12.2%
• Yes, but a shorter one
  14.5%
• No, I was just too busy
  11.5%
• No, Covid restrictions meant I couldn’t go away
  50.3%
• No, didn't want/need a break
  11.5%

Vote View Results Cast Vote

This week’s comments came under the article: The false dawn of mortgage advice technology – Scott 

Stuart Phillips said: “Technology still has its place, it just isn’t going to replace people. Brokers should be able to have much richer tools to help them connect complex customers to the lenders that have an appetite for them.  

“Technology will change the industry, just not in the way the business school grads might have dreamed up in their ideal worlds.” 

He continued: “Unfortunately, the mortgage broker industry is too small for most investors and the only ones interested are the ones who want to own it all and keep every penny generated along the way. 

“As for the question of speed, getting it right first time has to be the priority, and we are still sorely lacking the tools and the communication options from lenders and others to do so effectively.” 

Very Deceptive also commented, saying: “I’m sure the research and development departments of these determined companies attract massive investment with their promise to disrupt and conquer.  

“Research and development and IT departments must be laughing every time the IT directors show their PowerPoint presentations promising their fools’ gold. Investors clamour and throw their millions of pounds at them.” 

“However, the truth is, just like creating self-driving cars, the algorithm is inexplicably complex. And so perhaps billions of pounds will be needed before it actually works. 

“Then the question will be, whether anyone will want it, or even trust it with the homebuying rollercoaster. 

“To the angel investors of the future, good luck with our market. Deep pockets need not apply, you will need bottomless pockets.”

This busy period is undoubtedly having an impact all the way through the mortgage market so, this week Mortgage Solutions is asking: Are you working longer hours to maintain current business volumes? 

Pam Brown, principal at Pam Brown Mortgages 

Due to the tsunami of mortgage and protection enquires in the last few months, the life of a mortgage broker is way beyond the average person’s nine to five.  

With a limited number of lenders currently in the 90 per cent loan to value (LTV) market, we find ourselves glued to the laptops at 7am trying to secure our clients 90 per cent deals.  

With rate changes and criteria changing almost daily, we have to make sure the application is submitted, and the client secures the rate that was given to them at the approval in principle stage.  

During such challenging times, and in the fast-paced market we find ourselves in, managing the client’s expectations is in itself a full-time job.  

The hours here at Pam Brown Mortgages have definitely increased and are 100 per cent more stress filled, and some days feel like a pressure cooker. However, all the increased hours, stress and higher expectations are worth it in the end when the client gets their new mortgage deal or new home. 

Andy Wilson, director at Andy Wilson FS  

Mortgage business owners and self-employed advisers will tend to work whatever hours are needed to get the job done.   

The drive and working ethos of those working for themselves is naturally different, and most will think nothing of dealing with clients over weekends and in the evenings. At the moment, this can also involve early morning starts, to try and secure funds using online systems where there are tight limits on the number of new applications some lenders will take.  

I find that the working life of a small business mortgage adviser is rarely a nine to five position, and never has been. Such advisers have the flexibility to rise to the occasion when business volumes increase, as at present. 

So, we are working longer hours than normal, but we did have a lengthy quiet period earlier in the year to provide contrast.  

Also, with the ongoing uncertainty about whether a second wave will close us down again, or whether house prices might fall and lenders restrict loan to values even further, we need to write business where we can.  

There has to be an acceptable work-life balance, but at times the balance will be tilted more towards work, and so we simply roll with it. Fortunately, the mortgage market has recovered rapidly and many advisers will be making hay whilst the sun shines, ready to pay for that long overdue holiday next year. 

Scott Howitt, sales director at Chartwell Mortgage Services

The simple answer is ‘yes’.  

Since the start of the Covid-19 pandemic, we have seen a significant increase in activity.  

Working predominantly in the new-build sector, our activity levels are always buoyant but the last three months have seen a 30 per cent surge in business, ranging from initial enquiries and qualifications through to mortgages being submitted. Our normal working practice is a seven day a week operation and we have continued with this throughout the crisis. 

As a business we are well positioned in terms of our systems and infrastructure and we have adopted some of the latest tech in our industry to handle the increase in demand.  

Interestingly, the spike in activity levels has helped us shape some of our future working processes which will undoubtedly help us grow our business further over the coming years. 

The current challenges in the market, such as lender LTV updates, additional underwriting requirements and product changes, mean that our adviser and support teams have been working longer to ensure that our service is not compromised and that we are meeting the expectations of all of our customers.