Buyers’ market is driving demand for quicker mortgage applications – Marketwatch
But whether is this a result of consumers demanding faster turnarounds or companies flexing their muscles is up for debate.
This week, Mortgage Solutions is asking: Have you noticed an increased pressure from borrowers when it comes to how quickly a mortgage application is processed and why do you think that is?
James Chisnall, director, City Finance Brokers
Society today relies heavily on technology and this has been creating a ‘have it now’ attitude among consumers.
Many clients underestimate the volume of work that goes on behind the scenes in order to achieve a mortgage offer and can therefore find it hard to understand why there can be delays in the underwriting process.
With purchases, particularly residential ones, there is an emotional cost to both the client and vendor. They are making life changing moves which depend on the success of a mortgage application and one hiccup in the process can adversely affect the lives and dreams of an entire chain.
This is where good advice, packaging and, crucially, feedback from a broker becomes key.
The sooner we can achieve a positive result, the closer families get to moving into their home, as has always been the case.
The current economic climate has created a buyers’ market, and this has also had an impact on expectations, particularly from vendors and estate agents who are keen to see the purchase go through quickly and without issue.
Our role as brokers is to take away some of the stress that is involved in one of the largest financial transactions of a client’s life and the more efficiently we can do that, the better for all involved.
George Roberts, mortgage director, Financial Advice Centre
There are several factors that will play a part in driving the demands of borrowers.
First, market conditions: The laws of supply and demand have played a part in increasing the pressure on borrowers to want a mortgage offer out quickly.
Stiff competition means purchasing a property is a time sensitive transaction, with many sales being negotiated on the buyer’s ability to complete in a certain time scale. For buyers competing for the same property the ability to complete quickly works in their favour.
Second, an uplift in new build purchases: With the increase in new build purchases clients are expected to exchange contracts in 28 days so time is of the essence.
Third, our digital world: With so much now digitalised, available 24/7 at our fingertips via our smart phones, borrowers assume their mortgage application is transactional and should be turned into an offer quickly. This assumption often sees borrowers setting unrealistic expectations leading to unnecessary pressure.
We endorse lenders working within the regulatory guidelines to ensure we avoid the mistakes of the past by vetting applications properly. To do this properly takes time – so what is the solution?
We are acutely aware of the challenge this presents and the importance of adapting as needed. We see our role as adding value to the process and not just enacting a transaction.
We’ve designed a process using technology as an enabler to keep all parties including solicitors, estate agents, surveyors and clients in the loop, working together, to the same time scales. This transparent and pro-active approach sees very satisfied clients and good working relationships with other professionals who want to work with us and refer business as well.
Graham Closier, head of mortgage development, Connells Group
While we have not seen borrower demand materially change over recent times, people naturally want a quick result and a speedy transaction.
That said, we put pressure on ourselves to constantly improve our customer service and a key part of this is to swiftly process our customers’ mortgage applications.
We practice a ‘Right First Time’ approach, ensuring every application is completed properly from the outset and in a timely fashion.
In our business there’s always been a desire to get a mortgage offer out quickly as it provides relief to the customer, as well as reassurance to everyone involved in the transaction that everything is progressing well in what can be an emotional journey.
The offer, however, is only part of that journey and there is always the potential for challenges in the process that can cause delays such as chains and conveyancing.
In order to mitigate any potential issues, we rely on our industry knowledge and lender relations. It really is a matter of everyone being totally upfront and transparent with timescales.
Yes, the industry as a whole has improved to produce quicker offers due to technological advancements, greater focus and lenders seeing service as a potential for competitive advantage, working hard to speed up their offer process.
However, the most important factor is to have good communication at every stage and especially when initially meeting with the customer to guide them through the process and manage expectations.
‘We’re losing at least 25 per cent of product transfer business’ – Marketwatch
At the time, the regulator said consumers were “being channelled unnecessarily into advice” and suggested the potential harm caused by execution-only did “not appear to be large”, thus encouraging lenders to capitalise on this particular route.
Being seven months since this statement, Mortgage Solutions is asking: Have you noticed a change in the behaviour and your relationship with lenders since the FCA made execution-only more attractive?
Mitul Patel, mortgage adviser at Lemon Tree Financial
Lenders have been contacting my clients earlier, up to six months before the end date of the fixed rates. It used to be only three months.
I feel it’s behind my back because we gave them the business then they write to the client and make it so much easier just to tick a box and get that rate, but as a broker, I have to justify why staying with that same lender is suitable advice.
But the clients want the easy option and ask why should I provide this paperwork when the lender can do it for me over the phone.
I’m finding we’re going back to the bad old days of the credit crunch when there was a two-tier system where the lenders would offer deals that brokers could not have.
Some of the broker-friendly lenders are telling the clients to speak to us but fewer lenders are pushing towards the adviser route. We have a diary system to contact clients and we’ve had to change it from three to six months because sometimes they’ve already done the business.
I would say we’re losing at least 25 per cent of that business.
The business development managers (BDMs) we see are supportive and we’re being told it’s out of their hands. It’s the bank’s decision to do that. They appreciate brokers and the BDM is looking after us and trying to get targets, but they’re disadvantaged.
The bank itself is sending these letters; BDMs are in our corner, but their hands are tied. They’re getting frustrated.
Matthew Fleming-Duffy, director of Cherry Finance
Removing barriers and going into a transaction on an execution-only basis should be perfectly satisfactory. In practice, however, it’s not and I don’t think it’s how we should promote the mortgage market.
I have a client who has five buy-to-lets, and he’s favoured five-year fixed rates as he had no requirements to change or sell. Five or so years ago I arranged one of his buy-to-lets with an intermediary-only lender.
His product ends at the end of December and I contacted him this week because I’ve got his details, I know his situation hasn’t changed so we can have a look around – including with the existing lender.
He emailed me back to say they had contacted him, and he had tied in again to a five-year fix.
Lenders say they will approach customers around 90 days before deal expiry. That’s way too early for me to get involved in a transaction, but they can switch him. They haven’t poached him because he’s an existing client but I am struggling to find another way to say it.
When I see a lender actively working against me, I feel a bit sad because it means the clock is ticking for people like me.
On the customer-facing websites, it says what you can do if your product is about to end but does not mention intermediaries.
A lot of lenders will switch before the end of a term with no early repayment charges, so there are methods they can use in a sly way to eliminate the need for advice. It’s difficult to manage.
Richard Campo, managing director of Rose Capital Finance
To be honest we haven’t seen any difference our side at all.
Perhaps it is the end of the market we deal in, in that we deal with more affluent clients and they completely understand the value of advice. There is no denying they are more than capable of arranging the loan themselves and leading the process.
However, any intelligent person knows how little they know in the grand scheme of things. I tend to find an inverse curve in the smartest people I know understand how little they know, and the dumbest tend to know it all. So, when it comes to execution-only that could never be truer.
Why on earth would you not get advice on one of the largest financial transactions you are likely to make?
If anything, lenders are making it more attractive to go via lenders.
While the increase in applications and online technology makes it easier to transact directly with a bank, and are being heavily promoted in the media, most sensible people would at least do a sense check before going down that path.
That is our experience and I could well be wrong. However, it looks like we have a job for a little while yet.
‘It’s our duty to ensure buy-to-let clients are constantly aware of market changes’ – Marketwatch
This is increasingly important in the buy-to-let (BTL) market where advisers need to keep in constant contact with landlord clients to inform them of criteria changes, new products and lender updates.
So this week Mortgage Solutions is asking its panel: In what ways do you update buy-to-let clients on market changes and how often do you do it?
Andrew Turner chief executive at Commercial Trust Limited
As a buy-to-let and commercial broker, the success of Commercial Trust is built upon the service we deliver.
It is important to us that we add value to clients, by keeping them informed of changes, not just in the TL and commercial finance industry but in the private rental sector as a whole.
Over time, this has become ever more prescient – of late, the rate of change has been phenomenal.
Each week we share information, via email, from a wide range of sources: our own data; direct from other sources; and by reviewing national, regional and industry news.
If a story breaks that is of particular importance, we will monitor the source live, if possible, and send out an ad-hoc announcement immediately.
Where we can share insight, or give opinion on arising issues within our specialism, we will do so. When we discuss wider issues affecting UK landlords, that fall outside of our specialism, we will signpost sources of further information.
Our clients range from the accidental or first-time landlord, to portfolio investors with hundreds of properties.
Whatever the case, the money invested is there to achieve financial security. It is our aim to help those we work with access information that will help.
Both quantitative and qualitative data shows us that this resource is greatly valued. We frequently get very positive feedback from those we correspond with.
Chris Sykes, mortgage consultant at Private Finance
No portion of the mortgage market has been more affected by recent changes than the BTL sector.
We as a firm therefore believe it to be our duty to ensure that our BTL clients are constantly aware of such changes and are making informed decisions based on such information.
In addition to direct customer contact, we make great efforts to ensure that our blog and newsletter are always full of the kinds of clear, current, and comprehensive information that will most benefit our clients.
Of all the client-types we work with, BTL owners are perhaps the most responsive to the information we provide them. Such individuals have made a conscious decision to invest in property, rather than simply putting a roof over their heads, and are therefore always keen to better understand the market.
We work closely with an accounting firm who provide clients with appropriate tax advice.
Additionally, we draw upon a number of statistical sources, including Land Registry, Bank of England, UK Finance, and Office of National Statistics to ensure we are always abreast of market developments. This allows us to provide our clients with the best, most up-to-date advice possible.
To date, the response has been very positive. BTL owners want to know the factors that affect the value of their investments.
Howard Reuben, principal at HD Consultants
As a BTL broker, immersed in an everchanging marketplace, keeping in regular contact with our new and existing clients and discussing market changes, product and lender launches and criteria updates, is part of our ongoing client service proposition.
Our range of contact systems includes sending out our branded newsletters and magazines, we have a blog site being developed, a prompt and diary reminder system to ensure our clients are kept aware of product changes, as well as a customer relationship management system assisting us to maintain regular contact.
HD Consultants is also, and has been for many years, the preferred specialist BTL mortgage broker company on a number of the UK’s leading online BTL/landlord forums, which has between them a combined captive audience of circa 220,000 subscribed members and readers.
We write articles, respond to readers’ questions and queries, and provide a team of brokers to answer the BTL borrowers’ questions on the ongoing market changes, from being a first-time landlord to the more experienced portfolio owner.
The information we impart is not always what people want to hear, especially now due to the restrictive Prudential Regulation Authority rules, portfolio aggregate borrowing limits, document requirements and the minefield of stress tests; but the more informed they are upfront, the speedier and more efficient their applications will be.
The landlord sector is very responsive to our experience, knowledge and regular updates because they realise they need to meet the numerous and continual changes and challenges they are faced with.
‘If a system outage means going to the office late at night, I will’ – Marketwatch
While that may be the case for those who need immediate direct banking access, when it comes to the mortgage market, brokers are constantly working to ensure that when such things out of their control occurs, anything they can do on their end will result in their client’s needs being handled swiftly and with little issue.
So this week Mortgage Solutions asked brokers: How do you manage system outages at lenders?
Howard Reuben, principal of HD Consultants
We don’t really suffer many actual full-blown outages at all.
Lenders, just like any business, upgrade their websites and usually do so out of office hours. They are mostly also quite keen to issue an advance downtime warning, but as all lenders have numerous contact points, any outages are really only just a minor inconvenience.
Criteria can always be checked via a number of other resources which we have available. The only real issue when websites are disrupted, and systems are down is when we need to have access to keyfacts illustration (KFI) production to present and submit a case.
We can usually manage this inconvenience too, via the ‘file note’ process. But overall, none of this happens very often at all.
Usually if we need to call a lender, it’s to discuss a quirky case or double check criteria. Sometimes the client is waiting on the answer too, so timing can be an issue.
We have strong relationships with most of our lenders and their business development managers and can usually speak directly with them to assist with any challenges that may occur.
To manage this, we can arrange times out of standard working hours which is sometimes okay for the client albeit its less convenient for us – but that’s always been part of the job.
Generally, I receive advanced notification from the lender that it’s going to happen, and we do also find that lenders mostly go the extra mile to put things right as soon as possible. Communication is generally prompt.
Regarding our own system, we outsource our own IT support and instead concentrate on being proactive and productive brokers.
Chris Hall, operations director at Mortgage Guardian
It all depends on whether the system outage is a planned operation or an unexpected bug or failure in the system.
Most lenders schedule planned maintenance outside of normal working hours which is highly appreciated, but unintentional outages can occasionally happen.
I only get to find out about those ones if I am in the lender’s portal or get an email update. As I am ‘whole of market’ with a large lender panel, the chances of me being affected in the middle of an application are fairly slim. If it is an update I need, nine times out of 10 I can wait without too much inconvenience.
Whether a planned outage or not, the main objective is to continue to meet client expectations. If that means providing extra communication and coming back to the office later when the family have gone to bed, then I will.
Outages do not happen that often so I can easily absorb these things on an occasional basis.
I think from a lender’s point of view, it is a black and white scenario. They want to keep mortgage brokers working just as much as mortgage brokers need to work, so at least we are all singing from the same song sheet.
Lenders invest significantly in providing high quality systems which are well maintained. I would expect there are procedures in place to deal with unplanned outages. Lenders tend to communicate well under the circumstances.
As for our own in-house arrangements, we believe that investing in good quality scalable systems is essential, and preparation for outages should be anticipated.
Luke Martin, mortgage and protection adviser at OnPoint Mortgages
We find that outages with lenders are far more infrequent compared to a few years ago and they do not tend to have a huge impact.
The biggest issue for us is typically a provider’s system only working on certain web browsers or when you are looking to key in a case late at night and there is maintenance taking place.
Of course, we realise that overall, the evening is the least disruptive time for this to occur.
If there is an issue during working hours it is a case of updating the client so we can manage their expectations. We find lender communication to be strong when this does occur, as it may take some time to catch up on any delays that have been caused.
Internally at OnPoint Mortgages everyone works remotely which does provide protection against issues with the power supply or phone lines, along with the use of mobiles.
In regard to our customer relationship management (CRM) system there is protocol around reporting any problems as soon as possible and keeping the customer informed.
AI recommendations could negatively impact a client’s future options – Marketwatch
Artificial intelligence (AI) has been lauded for its ability to speed up and simplify processes by “learning” to take on some of the decision making processes humans carry out, and where it is used in the initial stages of an application process play a role in identifying what it considers to be the best products for a client.
As with any technological process, however, it doesn’t come without its negative points. So this week Mortgage Solutions is asking: Should more brokers embrace AI technology that narrows down a client’s choices in the first steps of the application process?
Michelle Niziol, CEO of IMS Property Group
Whether you’re asking Siri on your iPhone for directions, or Alexa on your kitchen counter for movie listings, there is no doubt that AI systems have become a significant aid to many people’s daily lives. The question is, do AI systems make sense to use in the mortgage industry?
In my opinion, they do not. While there are certain advantages to using AI systems for mortgages, such as ease of application submissions and speed of turnaround for decisions, there will inevitably be situations with buyers that simply cannot be understood or appreciated by an AI system.
For example, a recent client of mine wanted to purchase a home for her young family. In their mortgage calculation, their childcare costs drove down their approved borrowing amount significantly. However, she had plans to have her mother move in with them after four months to help with childcare, eliminating these costs. While an AI system would find it difficult to incorporate this, our ‘human approach’ allowed us to explain our client’s childcare situation with the lender, who understood and was able to make an exception.
Today, she has the home of her dreams, and her mother has moved in to help with childcare, allowing her to easily meet her monthly payments. Had she gone through an AI system, she would not have been able to purchase her home. The purchase of one’s home is usually the largest single investment that people make, and having the human element involved makes sure that people are looked after, and not just treated like a number.
Anna Pepler, managing director, Key Solutions Mortgages
We believe that there are many pros for brokers who embrace AI technology that reduces a potential purchasers’ choices as a first step on any application. The initial stages of a fact find are mainly concerned with ‘hard facts’. Because AI can speed up this basic task of information gathering, it will be advantageous to both the broker and the client.
The downside on AI technology is that any system is only as good as the quality of the information that is input, and a client’s understanding of things such as overtime/shift allowances and the level to which this is guaranteed may be ambiguous without robust questioning which would affect the filtering process and won’t provide as much of an advantageous outcome for the clients.
No recommendation is complete without gathering soft facts and there is a danger with AI that clients will believe that a mortgage recommendation is purely based on hard facts. Therefore, they will select the headline product without due consideration of other factors which could negatively impact their future options.
We believe that AI technology will inevitably become the norm in the mortgage process and we welcome any progressive change but care and consideration needs to be given to its implementation and clients should have the choice of whether to participate rather than it becoming the default option. Our belief is that AI technology will never fully replace the adviser as people tend to want expert human interaction at some point along the process.
Payam Azadi, director of Niche Advice
I was part of the team some 20 years ago that designed a system called ‘MortgageLink’ which was an end-to-end fully online mortgage sourcing system. We were not even the only ones with competitors such as the Charcol Online, TMOS system and Mortgage 2000 – which later became Money Supermarket – so AI and intelligent systems have been around in the industry for a long time.
So why now are we seeing so much in the press and media about AI? Well, it’s because AI has the power to change industries to a whole new level, but its logic is only as good as the people who code it. The current Mortgage Sourcing Systems are living proof. I’m now a mortgage broker and regularly use two of the most widely recognised systems and almost on a daily basis I discover inaccuracies with product criteria, which effects its sourcing accuracy output. Don’t get me wrong, they narrow down the options – and are a vast improvement on published formats such as Moneyfacts magazine that age before they leave the press – but they do not pick the perfect mortgage either.
My point is that we should embrace technology as it has distinct time saving qualities and out of office coverage. However, you cannot replace experience and advice, and this is often determined by gathering ‘soft’ rather than ‘hard’ facts from customers, and hand holding when the chain has challenges.
Lender loan book sales: ‘This is mortgages not politics, there are actual rules people play by’ – Marketwatch
Tesco Bank chief executive Gerry Mallon said the company made sure the mortgage book was sold to a purchaser that would “continue to serve [its] customers well” but when it comes to people’s finances, it’s no surprise that doubts and worries might arise.
So this week, Mortgage Solutions is asking brokers: How would you reassure customers who have had their mortgage book sold to another lender?
Richard Campo, managing director of Rose Capital Finance
My primary advice for anyone who has had their loan sold on from Tesco to Lloyds (or any other lender) is to relax and think of it as a compliment.
Your loan, along with the others sold, is seen as a valuable asset. Meaning, in their assessment, you are likely to keep paying your loan and your property is good security for the debt. Neither of which are bad things.
It is also well worth bearing in mind, this is mortgages not politics, there are actual rules people play by. Lloyds will be bound by the conditions of your contract through any product period.
So, if you are three years into a five-year fixed rate, your rate won’t change. This is protected under contract law and while not absolute, common sense would dictate that Lloyds would not want to turn off any new customers they have just gone to great lengths to acquire.
One note of caution would be that when your deal comes to an end, the reversion rate you expected to go on may change. That said, any sensible mortgage customer will be looking at arranging their new deal around six months out from their current one expiring and this should be no different.
We conduct annual reviews with our clients for this reason, to reassure them and explain the process even if the product is not up for a few years. In this instance, Lloyds’ retention policy does look to be better than Tesco, so while every little helps, I would view this as a positive switch for anyone affected.
Steve Moses, mortgage and protection adviser at Mortgage Studio
If our clients’ mortgage is sold to another firm, they will undoubtedly have lots of questions about how this affects them.
It could come as a shock, and not knowing the impact could, understandably, cause some panic. Tesco have said they will be writing to their clients to outline what the switch will mean, but clients may still feel in the dark about their long-term borrowing prospects.
We feel it’s worth reassuring clients that the terms of their original mortgage contract cannot be changed. For example, their fixed rate will stay the same, or their tracker will have the same margin above the Bank of England Base Rate, until that product was originally due to expire.
However, at the end of their initial rate, there’s no guarantee that the provider can offer them a new deal and, according to the Financial Conduct Authority’s (FCA) market study, not switching from a standard variable rate means missing out on average savings £1,000 per year, during the introductory rate period.
This is an opportunity for advisers to show the value of their advice and demonstrate support for clients throughout their mortgage journey.
Proactively contacting affected borrowers, answering their questions and developing a plan to ensure the best chance of getting a good deal when the product expires, will help to build long-term relationships and loyal clients.
With Tesco loans being sold to an active lender such as Lloyds, we think it likely that a new deal will be available when the initial rate expires.
Tony Nottage, managing director of The Mortgage Place
I generally remind customers that all residential mortgage contracts are regulated by the FCA and they are covered by the Financial Ombudsman Service (FOS) and the agreements they sign are covered under UK law and financial regulation, the main concern is if the lender goes under or if their debt gets sold to a third party.
However, if this happens they have still entered in to a contract and during their ‘deal period’ nothing can change only the name that the direct debit gets paid to.
The other concern is what happens after the deal comes to an end? That is easily addressed; we will remortgage to a new lender – in most cases this is easily achievable.
The advice that I would give would depend on the situation of the client and what the purchasing bank has outlined will happen.
If they are saying that they are going to put interest rates up I would be looking to remortgage my client to a new lender to a more favourable rate of interest, although in the current Tesco situation I can imagine that Lloyds would alter the standard variable rate (SVR) that Tesco were charging as it is higher than their own.
Although I haven’t had any client come to me specifically with Tesco mortgages, I don’t think that would alter the advice of see what is being offered and not to panic, at the end of the day Lloyds is a large UK bank regulated by the FCA.
Help to Buy remortgage lenders would have changed without government intervention – MarketWatch
So this week, Mortgage Solutions is asking brokers: How do you think these changes might stimulate the market?
Phill Green, founder and CEO of Trufe Money
If you were expecting that an overhaul from the government of Help to Buy (HTB) would mean significant changes, ideally positive, addressing its flaws then unfortunately you’re going to be sorely disappointed.
It’s no exaggeration to say the HTB scheme has very serious questions surrounding it. It’s a Christmas Tree initiative meaning that each of the players in the process gets to hang things on it allowing them to generate their own bit of profit.
It’s expensive, inflexible and un-transparent but what’s insidious about the scheme is how it’s marketed to first-time buyers (FTB) to get on the ladder.
The government will laud the 210,000+ properties purchased using the scheme but 81 per cent were FTBs, meaning 171,000 people dreaming of owning their own home have been taken advantage of.
If there was a genuine overhaul coming, I’d could talk glowingly about how the equity loans in the scheme are a fixed value amount not a percentage.
I’d be delighted to say that the mounting fees at the beginning, throughout and the end of the process were regulated.
I would be welcoming the news that the government had worked with lenders to guarantee a full suite of remortgage options and I’d be able to understand why the average purchase price for those FTB’s using HTB is 20 per cent higher than the average FTB purchase price.
Don’t worry though, the overhaul means that the scheme going forward will only be available to FTBs and we will have regional purchase price caps. So, it’s all sorted.
Adam Kasamun, associate director at LDNfinance
Allowing buyers to extend their mortgage to beyond 25 years brings the HTB scheme in line with lender criteria, which previously had perhaps made it difficult for some buyers to qualify for the scheme.
If the issue being assisted is, that in higher priced property areas for buyers, there is an inability to save enough for a deposit as a result of higher living costs, then setting an arbitrary limit on the length of the mortgage allowed is counter-intuitive.
At the moment there are at least 25 lenders that engage with HTB, all offering a different proposition to the next. With this, the majority of mortgage applicants should have an option when it comes to securing a mortgage, subject to the usual caveats of course.
Currently, remortgages appear to be a bit more restrictive in terms of offerings, with approximately 15-20 lenders allowing a remortgage when not repaying the HTB loan. I think this would have changed organically regardless of these changes being implemented.
When it comes to stimulating the market, there is no need to reinvent the wheel.
What is needed is more housing and so, while these schemes are welcome and offer an opportunity to some who otherwise would not be able to buy a property previously, if owning a home is to become a reality for everyone rather than the few, then a solid commitment to house building must be implemented and followed through.
Nicola Aborn, managing director of The Mortgage Hut
Since March 2018 around £43bn worth of property has been bought under the HTB scheme. It is safe to say that HTB has been one of the most successful government initiatives in decades as it has driven the growth of home ownership.
Extending HTB a further two years past 2021 is a welcome step for the industry. And though it will be restricted to first-time buyers, 81 per cent of current scheme users are first-time buyers so we don’t anticipate it will have a negative effect on the market.
The part of the amendment which stands out is that consumers will be able to take the equity loan for up to 35 years rather than the previously mandated 25 years. This is good news for homeowners in the scheme as they will have greater security and stability.
As an industry, we already have a diverse range of criteria for lenders to enable us to give consumers the best solution possible but there is still room for improvement.
We would like to see more lenders entering the HTB remortgage market. More lenders will mean consumers have a lot more suitable choices as it is more competitive.
Going from a market with a small number of players and options for consumers 18 months ago, we now have a very healthy and effective market for HTB homeowners looking to remortgage. We must continue to offer more choices to uphold the scheme’s successful legacy.
Comparison sites never claimed to be giving personal advice – Marketwatch
This shone a light on the role of brokers at a time when consumers may be forgoing professional advice in favour of information readily available at their fingertips – regardless of how detailed or accurate.
So this week Mortgage Solutions is asking brokers: Are price comparison sites too simplistic? How do they highlight the importance of advisers?
Greg Cunnington, director of lender relationships and new homes, Alexander Hall
The Experian report was an eye opener but would not be a surprise to intermediaries who understand there are a lot more nuances. It is also a strong reflection on why any focus on price alone is incorrect and will not lead to the best outcomes.
There are over 15,500 residential and buy-to-let mortgage products currently available in the UK, according to Twenty7Tec. This number is increasing every year, highlighting the vast number of options out there. This is a minefield to navigate for anyone looking without help.
Combine all those options with infinitely varied personal and income circumstances, the variety of property types and how they can impact a buyer’s options – you can see how product alone selection is far too simplistic.
There is also the added element that with the more complex client scenarios, a manual underwriting assessment is required.
It is not only circumstances that mean advice is key, but also the myriad of options available. All clients should seek advice on something as important and complex as a mortgage, which a comparison site cannot offer.
For clients who worry after rejections, we can see from the eligibility stats that if they have applied based on price there was a good chance they would be rejected, and there is still a good chance there will be options out there on the market for them. Therefore, a comparison site should be used just as a rough guide, but advice should be taken from an intermediary before any lender is approached.
Miles Robinson, mortgage sales director, One 77 Mortgages
In my view, comparison websites are informative tools to give clients an indication of rates and eligibility of mortgages, essentially a simplistic overview of what is available to a client. These tools can be very useful for clients that are not quite ready to fully commit to the mortgage process or are in early stages of a purchase or remortgage and just wanting an indication.
We live in a world where consumers want answers at their fingertips, comparison websites fit that purpose, however as a business we have found that at the point clients are ready to commit most ‘want help’. For a comparison website to provide an ‘advised’ recommendation of the suitability of that mortgage is questionable, therefore does that constitute advice?
The comparison website is asking a client to input all the correct information and then confirming the lowest rate product is the best for them without any interaction from a qualified adviser.
A comparison website is also relying on a consumer to input the correct income and commitments as the lender would see them and for complex incomes or multi-income streams or multiple commitments both credit and non-credit, these are where the variables happen and I assume this is how a third of cases result in a decline, simply a client not understanding what they need to provide or what should or should not be taken into account.
In summary, comparison websites are great for initial checks and eligibility but having a qualified adviser to help you through the application is priceless.
David Hollingworth, associate director at London and Country
Comparison sites have been part of the market for some time now and given the strength of comparison sites in many sectors of personal finance such as insurance and energy, it’s highly likely that mortgage customers will have looked at comparison sites before talking to an adviser.
Comparison sites have never claimed to be giving users advice on personal circumstances. Although it has become easier for borrowers to customise and filter the best buy listings, there is still much more to securing the right deal.
Advisers can ask questions around lifestyle to help the customer determine the right approach for them, before factoring in their individual circumstances to make sure they can pinpoint the right deal and criteria.
Comparison sites recognise that and we work in partnership with several to provide an advice option to customers that do not want to, or are not confident enough, to apply for a deal without greater reassurance.
The figures from Experian highlight the fact that qualifying for a deal and meeting the quirks of lender criteria is just as important to the success of an application as finding the cheapest rate. Of course, sites are and will continue to develop eligibility tools to improve that success rate.
It still won’t constitute advice and we know that although consumers like and expect to be able to interact online, they will often still need the assurance of advice. Brokers need to ensure that customers understand the added value that can bring.
‘The big lenders are very hot’ on deal-end communication – Marketwatch
The company called for a mandatory “Four Months’ Notice Pledge” while those in the industry insisted enough was already being done to notify customers that their contract was coming to an end.
So this week Mortgage Solutions is asking brokers: How do you determine when the right time to initiate deal-end communication is and what advice or products do you offer?
Matthew Hillyer, associate director at Largemortgageloans.com
I was surprised to see Habito suggesting lenders were not proactively contacting their clients before the end of their deal.
Since becoming a broker six years ago I have not encountered a single client on a residential or buy–to–let (BTL) mortgage who has not received a notification that their rate would be changing soon.
The question of whether lenders are doing this soon enough is harder to answer as we deal with so many different institutions, but I think it would certainly be fair to say that the big lenders are very hot on this, with many getting in touch six months in advance and some even offering clients the opportunity to swap early if it means they will be on a lower interest rate.
The main area of concern for me, is whether clients are fully aware that by going direct to the lender they will not be receiving any advice. While some of the more sophisticated clients will, I think there will be a large percentage of clients who don’t know all the terms and conditions.
We normally look to contact clients around seven months in advance of their rate expiry. This is because most lenders have offers that are valid for six months and most of our clients like to have the comfort of securing a new product early.
We will contact clients weekly until we speak to them. Although most like to lock in a new rate early, there are some who will wait until the last minute.
Dilpreet Bhagrath, customer experience manager at Trussle
Typically, homeowners should be reviewing their mortgage three to six months before the end of its initial period to see if it’s the right time to switch. But, with 41 per cent of borrowers finding the mortgage process stressful, it’s no surprise that so many shy away when it comes to remortgaging.
People might feel as though they don’t have the time to look into switching, or that it’s too much hassle, even if it could save them money. It’s important that brokers communicate with their customers throughout their mortgage journey in a way that suits them.
They should also be leveraging technology to speed up the process and remove pain points for customers.
We’ve introduced a free mortgage monitoring service that continuously compares any mortgage with 12,000 deals on the market. We then alert the customer as soon as it makes sense for them to switch, taking into account any early repayment charges if we recommend they switch early.
We’re also campaigning for the Mortgage Switch Guarantee: a new set of principles for the industry to adhere to. This would require lenders to commit to contacting borrowers three months before their initial rate period ends, showing them key mortgage information online or via SMS messages, and displaying the true cost of a mortgage’s initial rate period.
This will offer consumers greater protection, awareness and understanding when it comes to their mortgage, preventing them from paying more than they should.
Nick Sherratt, managing director at Mojo Mortgages
We start contacting customers eight months before their deal is due to come to an end. In our opinion it’s too late to start contacting customers four months before their deal ends as every circumstance is different.
If a customer wants to raise additional capital for home improvements or building work, they will need some time to work through how much they need to raise.
We have designed our strategy around specific personal circumstances. We don’t differ the strategy based on the length of the mortgage, but the date of communication is relative to the initial fixed term.
We will contact customers up until their deal expires. Our technology also allows us to serve a product transfer option to them which we are able to complete in hours with some lenders, not weeks or months.
We don’t want to bombard our customers with too much information. Our communication strategy is sophisticated and allows us to determine engagement, which allows us to define the next best action.
Customers are also able to book an appointment with their adviser at any point in the journey.
What we recommend will be based on what the customer wants to achieve. We are easily able to provide our customers with a like for like remortgage quote along with a product transfer option for them to compare side by side.
We can also review the protection needs for a customer looking to increase their borrowing and ensure that their home insurance is still sufficient.
Longer-term mortgages could increase competition and force brokers to sell insurance – Marketwatch
As Virgin Money took what some considered a bold step in launching a 15-year fixed rate mortgage, Mortgage Solutions asks: are longer term products the future of the market, why might that be and just how will brokers maintain a relationship with clients with such lengthy downtime periods?
Andrew Asaam, director of mortgages at Virgin Money
We have seen a positive response to our seven- and 10–year fixed products since their launch last year and wanted to further extend the choice available to consumers.
We are looking to attract both home movers and remortgage customers, who are seeking long-term interest rate certainty, knowing that their monthly payments will not change for the next 15 years.
Mortgage advisers have been advising on multiple year products for some time. These products are an extension of that. Relationships between the adviser and their customer are maintained in a number of ways through updates and other products such as life insurance and home insurance and so the length of a fixed rate mortgage should not change that dynamic.
Advisers have to recommend the right product for the customer now, taking account of their circumstances, future intentions and attitude to risk. For some customers, this product will be right for them now and we are therefore filling a market need.
It is all about providing customers with a choice. These products provide customers who want it with long-term interest rate certainty, knowing that their monthly payments will not change for the next 15 years.
Lilla Dilliway, director – mortgage and protection adviser at Bluewing Financials
Whilst every client has their own reason for preferring a shorter or longer-term deal, ultimately, it’s a combination of things. Recently, it’s been largely due to Brexit and other events feeding a feeling of uncertainty. Also, long term fixed rates that are not much higher than their short-term counterparts, so clients don’t mind paying a little extra for avoiding the hassle and potential costs of a remortgage. Lastly, the changes in buy-to-let (BTL) assessments favouring five-year BTL fixed rates are often taken out by necessity rather than choice.
I’m not close to the fire to be privy of the reasons for political and higher-level financial decisions, however, I’m sure banks have their own reasons for making longer term deals more attractive, just as the political leaders are shaping the BTL landscape in a certain way for a reason. I can make an educated guess, but it’s perhaps best to discuss it another time.
Changing the “traditional” setup from two-year cycles to five-year ones is definitely a challenge to brokers and keeping in touch with clients is even more important than ever. Fewer remortgages may increase the competition for new clients and force brokers to focus on selling insurance.
As a side note, there are client preferences which are completely independent from UK banking and politics. For someone who works abroad occasionally, dealing with frequent remortgaging is not practical. Some are used to fixed rates for the duration of the mortgage term while others who expect asset appreciation don’t need the flexibility of a short-term deal.
Daniel Unthank, managing director of Holbrook Property Finance
As a directly authorised firm, we offer all available rates. Every client is different, with some wanting the flexibility associated with lifetime variable rates and others the stability of longer-term fixed rates.
We’ve certainly noticed an increase in demand for five-year fixed rates. Reductions in pricing and the gap in the payable rate between two-year rates and five-year rates has made them a much more appealing option. However, we haven’t seen a huge demand for longer term fixed rates of 10 years plus. Most are put off by the early repayment charge structures that these invariably come with.
I don’t think this will be the way that the market is heading. I think fixed rates of 10-years and over will continue to be a fraction of lender’s product ranges. Maintaining relationships is all about regular contact regardless of the product term. Having that strong bond with clients means that they naturally respond when it’s time to remortgage.
When you start factoring costs such as arrangement fees and, potentially, valuation and solicitors, it can easily be more expensive to remortgage every couple of years. If the pros and cons are fully explained to clients, there should be no reason for their trust to be broken.
The general feeling is that rates must increase at some stage. The uncertainty is when this will happen. Fixing for 10 years now may sound very attractive, but if rates do increase over that period there is the danger of ‘payment shock’ at the end of the product term.