Category: Mortgage

In a mortgage industry that seems to change as much as the weather in the UK, we have compiled a short list of key financial dates worth noting for you and your client. From scheduled tax changes and the ending of housing schemes to annual speeches and financial events, these important dates will keep you and your clients ahead of the game in 2016.

16 March 2016: Budget Speech

One of the most important events in the industry calendar will be Chancellor George Osborne’s annual Budget speech. After a cautious pre-election budget in 2015, some experts are preparing themselves for more change as the government tackles the housing crisis head on.

Anticipated announcements are on pension taxation and changes to tax relief, possibly moving from a tiered system to a flat rate. But whether more changes are on the way remain to be seen.

21 March 2016: European Mortgage Credit Directive

One of the biggest, yet scarcely mentioned financial changes in 2016 will be the MCD, or European Mortgage Credit Directive. This will come into play in March, introducing an EU-wide framework of conduct rules for all mortgage firms.

Designed to further protect consumers and create a sole European market, our rules will be set by the UK’s Financial Conduct Authority (FCA). The biggest effect this is likely to have on the industry is on buy-to-let mortgages, foreign currency loans and the introduction of a European Standardised Information Sheet (ESIS).

1 April 2016: Stamp Duty BTL

Changes in Stamp Duty Land Tax (SDLT) come into effect on 1 April 2016. This will mean higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes.

Although designed to disincentivise the financial investment in UK property and increase supply for first-time buyers, some experts have questioned the tax increases and feel landlords are being unfairly targeted. Either way, the rush to complete applications has already started in order to avoid the increase in April.

25 November 2016: Autumn Statement

It may not get the same attention as the annual budget speech, but the government’s autumn statement has historically contained some surprising financial announcements, such as changes to stamp duty in 2014 and changes to tax rates last year.

December 2016: End of Help to Buy 2

December will see the end of the government’s Help to Buy: Mortgage Guarantee Scheme. Otherwise known as Help to Buy 2, it has helped many first-time buyers with only a small deposit onto the property ladder.

Unlike the Help to Buy: Equity Loan, which only covers new-build properties, Help to Buy 2 can be used for both new build and existing homes. The scheme is now being withdrawn as lenders bridge the gap, with many now offering mortgages on deposits of 5% without the assistance of government schemes.

TBC: A Base Rate Rise?

The possibility of a Bank of England Base Rate Rise has been the subject of financial speculation for several years now, ever since it was set to its lowest-ever level of 0.5% in 2009. Although many experts suggest that Mark Carney will announce a move on interest rates in late 2016, there are some that still say this will not happen until 2017.

If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.

Sharon Mawby, head of sales and marketing at Mortgage Intelligence network, takes a look at why technology will be a big focus for appointed representatives and directly authorised advisers over the next 12 months.

A recent poll has revealed that over half of mortgage and insurance advisers feel technology is “extremely important” in today’s market, whilst only 3% felt it was “unimportant”. But in an ever-changing digital world, I feel it is also important not to underestimate the ability for consumer needs to alter quickly and to consider some of the technological challenges facing advisers in the next few years.

Fighting off the competition

Many experts see embracing technology as a big challenge for appointed representatives and directly authorised advisers in 2016, with preparation and flexibility key if financial planning starts turning to alternative platforms. As Head of Sales and Marketing for an AR network and DA Club, I recognise that right now advisers are as busy as ever. But if the tide turns and competition with direct to lender and comparison sites increases, it is a good idea to be ready for the needs of the next generation.

Although client retention and referral is still the engine that drives adviser-introduced business, making your name heard in today’s online market is a constant challenge. It is very common for consumers to “virtually” approach advisers through the internet first, to get a taste of who they are and what they do, even when recommended by a friend or family member.

Securing an online presence

A professional-looking and easy to use website is a powerful tool to attract business, with more consumers approaching companies online first. Many advisers are adapting to changes in consumer habits, investing in user-friendly sites that also deliver alternative forms of contact and communication, such as online forms and FAQs. Using technology and software to ensure good customer management and effective segmentation is key, to help advertise to and contact the right people efficiently, allowing you to spend more time with clients.

Social media is still very much a subjective consideration, especially in terms of return on investment and reputation management. According to research, although two-thirds of advisers regularly use social media, only half use it for business purposes. But embracing formal social media platforms such as LinkedIn is becoming very popular, and more advisers are finding not only new business, but important networking and referral opportunities appearing. If you are thinking of taking the plunge into the world of social media for you business, it is important to plan ahead and ensure that you know exactly what and who your target audience is.

Preparing for a possible future?

No-one can exactly predict the future, especially when it comes to changing technology. But there are many experts that feel the move to “robo-advice” is an area that many advisers should now be considering. Recent regulatory changes, such as the Financial Advice Market Review, has seen lender and adviser innovation opening up the opportunity for consumers to get their financial advice virtually and online.

Although general surveys suggest consumers still opt for face to face advice for big financial decisions, times can change quickly. Leading lenders such as Nationwide are expanding remote mortgage advice to hundreds of branches and several advisers are also beginning to offer virtual appointments for their clients. As the consumer demographic becomes more tech-savvy, they will in turn most likely become more comfortable with online advice, which means advisers with the most flexible and customer-focussed approach will continue to succeed.

If you are interested in joining our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, contact our Broker Support Team on 0845 130 7446, option 1.

At Mortgage Intelligence, we invest in the right people and the right technology for both appointed representatives and directly authorised advisers. Sally Laker highlights the importance of maintaining a balance between embracing new technologies and continuing to support a people-based industry.

I recently changed my TV package online as the lure of the next two series of Homeland got the better of me.

The change was the usual story really – my password didn’t match, my e-mail address didn’t match and so I decided it would be easier to pick up the phone and speak to someone about changing the package. And, it was. It made me think about our industry and the need to deal with people face-to-face and over the telephone. The people factor builds trust and relationships as well as providing a valuable service.

The other essential tool is good technology. To provide a valuable record of the advice given to the customer and all the associated documents loaded onto the system. A good Point of Sale (POS) system is so important but like everything it is only ‘good’ if it is kept up to date.

We recently updated our version of the Key POS system to change the way in which we record data and use it. Even though the system is an up to date system, it was a substantial piece of work bringing in contract developers to deliver the changes we required. There are numerous stages, including the specification, which takes time and requires experienced people who understand the system to map out what is required. This then needs to be formatted – a different skill required, so that the specification can be interpreted into ‘developer speak’ to enable the work to commence.

Frequently, there are choices and processes that need guidance all the way through and it is important to consider the impact of any slight change, or you could be back to square one. Once the work is ready, testing begins. You need people who understand the system and will test it and try to break it. Flaws get picked up and then fixes and changes need to be done. That goes back and forth for some time until the upgraded system is ready to be released achieving the desired result. The cycle needs to continue and we regularly look at what the next enhancements will be.

The recent changes we have released were significant and we now have an enhanced system that incorporates the dynamics of today’s regulatory world.

After going through this process, it becomes less onerous as knowledge of the system improves. It was still a challenge, expensive and time consuming but we allocated a six-month timeline which was a tight timescale to keep the focus on the job and complete it.

We have always promised to invest in technology that provides a system that is up to date with mortgage and insurance industry needs and we will continue to do so. We do know that both appointed representatives and directly authorised advisers are not robots and that’s important to us, because although this is a people-based mortgage and insurance industry, we need to be backed up by good technology and not replaced by it.

If you are interested in switching over to join our award-winning Mortgage Network as an appointed representative, or becoming a member of our Mortgage Club, contact our Broker Support Team on 0845 130 7446 opt 1.

Even though the General Election took place over a month ago, many people are still talking about how it was such compulsive viewing, with many staying up until the early hours awaiting the result.

The fascination was watching all of the opinion polls and predictions fall by the wayside as the losing political parties accepted their fate graciously. How did these parties get their strategy so wrong, why did it not deliver the clear objective to win the election with an outright majority?

Commentators gasped as the charts changed to a sea of blue and the Labour party were in shock as they saw virtually all their Scottish seats lost to the Scottish National Party in one night. Surely if the Labour party had been close to their customers and understood what they needed to do to get their vote they would have changed their tactics to secure those votes.

What was their strategy and did they have the right culture within the party to question the tactics to deliver that strategy? How would it achieve the end goal?

If people are afraid to speak their mind and go with the majority to keep the peace that is a culture that doesn’t work in either politics or business. If the public didn’t see Ed Miliband as a strong credible leader, why did the Labour party not see that either? If they were in touch with their customers surely someone would have stumbled across it.

It is the same in business – we set a goal, we put together a strategy to achieve it and then look at the tactics required to deliver that strategy. As always it is the team that you build around you that adds the magic required, they need to feel valued and listened to, their views are important to ensure you get the tactics right.

Once the team understands what is required of them and why their role is so important to deliver the overall strategy you have a good chance of achieving your goal. Setting the right culture is in my view essential, and putting the customer at the heart of the business is a culture that works well and leads to success. We have seen what happens when you don’t!

Just a couple of months ago at our annual conference I was speaking about how this year is the year of the broker, and how everything is in place for brokers to be the key channel for lenders.

We have lived through lender shareholders demanding that more mortgages go through their branch network rather than the broker channel, and employing dual pricing tactics to deliver that result. All symptoms of a crushed market with restricted lending resulting in a ‘feed our own’ policy, and generally leaving brokers feeling unappreciated for all the business they had provided in the ‘boom’ years.

We have to accept that this is all part of changing market conditions and changing circumstances, and right now mortgages are back in favour, they offer good returns and my favourite words ‘market share’ are back. Those words are key to the intermediary sector and the desire to be at the top of the sourcing systems is also back. Despite mixed messages about the housing market, brokers are reporting all time highs in terms of mortgage applications and certainly we are seeing a 20% increase in the number of applications made when compared to 2014, which is significant because the first four months of the year were extremely strong.

It does seem to be across the purchase spectrum, with a few star sectors – first time buyers, especially new build, and buy-to-let with the addition of some promising new contenders gaining traction. Some lenders are already getting close to reaching their maximum ratio to residential lending. Consumer demand is still high for 2-year fixed products at good prices, although even 5-year fixed products are getting a mention if the rate is low enough.

The interesting misnomer is remortgages. Despite the real saving for borrowers who are coasting on lender’s standard variable rates; they are not rushing to the table to switch mortgages. In my view, it is a little bit like cash savings – most people don’t really bother to shop around to switch. If the difference is insignificant, it just isn’t worth the bother. Even though the differential on the mortgage could be far more substantial, apathy still seems to rule. It could be the thought of all that may be required in terms of time and effort to change, it may be on the ‘too much trouble’ pile, and unless the client is contacted specifically to remortgage they may not even think about it.

There is little in the media for consumers about the positives of remortgaging but with interest rates having been low for so long, arrears at an all time low, if people are managing their finances comfortably there is no incentive to investigate the options.

The threat of an interest rate rise has been publicised a number of times now and that has not made much impact apart from keeping fixed rates as the most popular choice for the consumer. So, it looks as though an actual rise is the only factor that will revitalise that sector of the market, which is probably around 25% of current mortgage lending. Such a different place to two years ago, and it is a good place right now.

As the market continues to be buoyant in the broker space, it is interesting to see how the relationship with the lender’s Business Development Managers (BDMs) is playing a more important role.

The market is exciting and constantly changing in terms of criteria and rates almost on a daily basis. As a distributor we do everything we can to get these messages across to network and club members but that interaction with the lender BDM is clearly adding value.

The feedback we receive is that the broker feels more confidence and trust in the lender when that relationship is good. Unfortunately, a less effective BDM creates the opposite and often a reluctance to use that lender when there are others that are equally suitable.

It’s all about communication and ensuring that the important changes are fed through quickly. Whether that’s at the end of the phone to give clear, correct information or face-to-face, the BDM is of paramount importance.

This sounds pretty simple but the range of service does differ. From a distributor aspect we also find that a good key account manager is a truly valuable asset. They enable us to get messages out to members on time and ensure that they can maximise opportunities. Exclusive products are slowly coming back in vogue and this is a key part of the lender relationship with us, and knowing your customer applies at all levels, and frequently delivers good results.

The new addition to this service is also the increasing ability to speak to underwriters about a case on day one. This is a well received service that can save time; reduce the application to offer time, making the process more efficient and cost effective for both broker and lender. With business levels increasing, it is very important for lenders to continue to look at new ways that they can make their proposition easier to access, as we all know 2015 is all about service.

With another Conservative government at the helm, it is business as usual for many involved in the new build sector. But it is this area in particular that has been given the biggest shot in the arm from several schemes, designed to re-invigorate a housebuilding market that is still lagging behind required volumes.

So with a government adamant they can now focus on new-build in this upcoming term, does the future look good for this crucial industry sector?

The only way is up…

Building up to the election, things were looking good for the new build market. The proportion of first-time buyers has risen from 35% to 50% since 2006, as a result of high rental costs, increased product choice and schemes such as Help to Buy. Meanwhile lending continues to grow, with the Council of Mortgage Lenders’ estimate for 2015 being £222 billion, the highest since before the financial crash. According to one leading lender, there were 118,760 new build purchases in 2014, up 8% from the previous year. There were also 137,000 new build starts in 2014, up an impressive 10%.

The increasing number of consumers that have used an intermediary for their mortgage is a positive outcome to stricter affordability post-MMR. This is especially true of first-time buyers, as they begin their journey up the property ladder with trepidation, making the expert advice you provide invaluable.

Scheme successes…

First-time buyers are still key to the success of the new build sector, which means things are looking good on the back of several governmental schemes designed to encourage and incentivise. Many schemes have been successful, especially Help to Buy, which saw 60% of all new build sales with a mortgage and over 80,000 purchase completions as a result of the schemes.

The Equity Share Scheme, or Help to Buy 2, has also proved successful and the number of new homes built last year would have been even smaller had this not been available. The Conservatives have already pledged that this scheme would continue until to the end of 2020.

A sunny outlook…

Starter homes are on their way. The conservatives have promised 200,000 by 2020, bringing advantages such as removing buy to let opportunities, earmarked brownfield land and reduced development costs. But some experts are dubious as to whether spending cuts can co-exist with promises such as this, putting even more onus on the private sector to supply.

It also looks like we will continue to see a record low Bank of England base rate for most of 2015, which will surely only be a positive thing as lenders continue to offer low deals and increase demand to spur on housebuilding. Experts believe that there are other factors forecasted to remain positive for the new build sector, such as increasing consumer confidence and stamp duty reductions.

With so many struggling to afford the current large deposits for their first home and the undeniable relationship between house prices and housing supply, it is welcome news to hear that the next Conservative government will focus on the new build sector over the next five years.

The need for Critical Illness cover has once again moved into the spotlight on the back of crucial findings from Cancer Research UK. They now predict that 1 in 2 of the UK’s population will develop Cancer at some point in their lives. Combined with the ground-breaking advancements in treatment pushing cancer survival rates beyond the ten year mark for half of adults diagnosed, protecting your clients and advising them on Critical Illness cover continues to be an essential part of your role as an adviser.

Sadly, despite the numbers the UK is drastically under-insured. This month’s Insight into Protection will explore some of the big issues, providing you with some of the facts and advice to raise awareness and discuss protection with your clients. We believe that by working together, we can close the UK protection gap:

What are the Facts?

50% of the UK population will develop cancer

It is still so surprising how many of the general public are unaware of the real numbers surrounding Cancer diagnosis and survival rates. It is a difficult and sensitive subject to tackle, but whether it be through loved ones or personal experience, a large number of us will likely be affected by the disease. Sadly, it can often take a tragic occurrence to make us stop and think, which is even more reason to encourage your clients to approach Critical Illness proactively.

50% of adult cancer patients are predicted to survive 10 or more years

Cancer survival in the UK has doubled in the last 40 years, a clear indication of the steps we have made to battle this terrible illness. It is this crucial fact that will be pivotal to your client protection discussion. This is difficult, as most people instinctively protect material investments such as their home and goods. But they will also want to cover themselves against the most likely scenario, which means given the facts, clients will want to ensure they are financially covered.

UK Households spend just £7.80 a month on medical insurance

According to the Office of National Statistics, under £10 is spent a month per household on medical insurance, compared to £22 spent on household insurance. Research from a top provider also suggests that 5.2 million UK mortgage holders who earn an income have no plan or protection cover in place to cover their mortgage repayments if they become too ill to earn, another reminder of the current UK protection gap.

Why is the UK lacking Critical Illness Cover?

Protection myths

One of the most damaging myths surrounding Critical Illness is that providers go out of their way to ensure they do not pay out on an insurance claim. This could not be further from the truth. In fact, several providers have proudly released figures regarding their Critical Illness claims for 2014, showing pay-outs of over 90%. One leading provider even announced that over half of their 2014 claims were settled within 21 days, with the quickest taking just two days to process. Reasons for the rare instances of non-payment were non-disclosure of medical information and more commonly, instances where illness definition was unfortunately not met.

Consumer reliance on state support, employer or savings

Unfortunately, some consumers believe that the state would cover them financially if they were not able to work for long periods. But state support is there to ensure individuals are not immediately put in a desperate situation, it is not there to protect an established lifestyle and maintain the financial commitments that come with it. Incorrect assumptions on how long employers would provide full pay, or how long savings would last are also common. So take the time to use current figures and calculations to show your client the facts around financial protection.

What can you do as an Adviser?

Prove your credentials

Nobody wants to be scared into buying a protection policy. Use software and applications such as the CIExpert comparison, to show your client the true value of their policy, not just the priced premium costs. LV’s Risk Reality calculator is just one of many useful tools that providers offer, to assist you in the sales process and provide your client with the cover they need.

Recognise the principles of TCF (Treating Customers Fairly)

Ensure that in no circumstance are you placing profit before the client, as this is not adhering to the FCA guidelines on Treating Customers Fairly. Instead, ensure your client has every chance to be fully covered, by providing clear access to all policy options that protect them against any chance of future financial detriment.

Make sure your client is completely covered

Although Critical Illness covers your client in the event of many long term illnesses, there are several reasons why Income Protection, Life or better still, a combination of the three could be more beneficial to your client. So tailor the advice you give to suit your client’s circumstances. There are even flexible protection options out there that include care, support and child protection, providing an even more comprehensive package for your client.

As an adviser, you have a tough job competing with comparison sites battling to offer the lowest premiums. But by beginning the conversation with the facts, proving your expertise and showing you are treating them as an individual, your client can walk away knowing they have been given every chance to ensure they are protected in the event of developing and surviving a Critical Illness.

Back in 2007 the Labour Government set a target of 240,000 homes a year to be built by 2016, in order to sufficiently meet forecasted demand. At current levels, the UK is quite a way off meeting this target. The National Planning Policy Framework (NPPF) highlighted that, “in the 12 months ending September 2014, only 117,070 houses were completed.” In fact, in 2012-13 the UK hit a post-war low of only 135,500 homes built.

But investigating and pinpointing exactly why the number is not being met opens up a minefield of debate; from the lack of social housing, limited building supplies, to the proposed link to poorly regulated immigration policies. Clearly a tricky subject to tackle with a myriad of issues, but this piece will dive in regardless and take a look at some of the possible causes for the UK’s current lack of housing:

Planning permission, red tape and local opposition

When UK house builders were surveyed earlier this year, they recognised that the house building target, even when modestly reduced to 200,000 by the Coalition, was in their eyes “unachievable”. This is a damming indictment from those at the front end, as they recognise that there are simply too many barriers preventing the UK from producing a free and fast-flowing house building system. The Home Builder’s Federation (HBF) pointed out that the current system is just “too slow, bureaucratic and expensive”. When questioned further, house builders suggested that the two main reasons for this are the planning system itself and local opposition.

The Coalition has made some moves to tackle these issues, such as slimming down NPPF regulations to streamline the system and increasing annual planning permissions close to 240,000. But Chris Walker, Head of Housing and Planning at Think Tank Policy, warns that not all permissions are built: “We probably won’t even get to 200,000 on the back of that 240,000”.

Affordable land, priority of profit and social housing

The charity Shelter points out that land prices have inflated “massively “in recent years. In fact, residential land prices rose 170% from 2000 to 2007, compared to house prices which rose 124%. Jeremy Blackburn, Head of Policy at the Royal Institution of Chartered Surveyors, suggests that public sector land is only one element. He emphasises the importance of actively encouraging private landholders to also release sites for homes.

Under the current system, house builders are not forced to use land that is bought, which could change under a Labour government with their “use it or lose it” policy. This would lead to house builders and developers being encouraged to build on land immediately, instead of gradually releasing properties in order to keep profit at maximum levels. It is business after all, therefore only strong state intervention for the good of the country can force the hand of house builders in the UK.

Several comparisons have recently been made between the private sector’s current domination of the house building market and the post-war boom of social housing. This era saw on average 100,000 public sector homes built a year, a trend that continued all the way through to the late 1970s. Although there is still much scope and need for private sector building in the UK, it has simply not produced enough homes on its own in recent years, which suggests an emphasis on social housing in the near future is fast becoming a necessity.

Materials, labour and small business

As we have already covered the grass roots of house-building, it is important that we also look at the production side of the industry. It is vital to ensure that we have the labour and materials needed so that once buildings have been approved, the process can move forward quickly, economically and cost-effectively. Planning permissions were last year granted on 230,000 homes, more than an improvement to previous years; but do we have the necessary materials and skills to produce the homes and meet demand?

Matthew Pointon, property economist at Capital Economics, suggests that “the surge in demand in late 2013 and early 2014 led to materials such as bricks running out”. According to monthly reports from the Department for Business Innovation and Skills, and the Office for National Statistics, stockpiles of vital building blocks dipped to 323m at the end of October 2014, down almost a third from 2012, and massively down from stocks of more than 1bn recorded in 2009.

If the UK wishes to meet the housing demand, it will also need to address the current shortfall of skilled labour, such as bricklayers and construction workers. In response, tens of thousands of new housebuilding jobs and apprenticeships are up for grabs under a deal struck in November 2014 between ministers and the industry. But training a labour force needs time, with the government even proposing bringing former military personnel onto building sites to cover the shortfall of labour.

An important area of the industry that has seen one of the biggest declines, is the number of small to medium businesses that are able to develop land. In 2007, there were 15 firms providing more than 2,000 homes a year. The following year there were just six. The effects of the financial crisis have exacerbated the issue by restricting lending criteria and making it difficult for small business to invest and gain traction in the market. In fact, data from the HBF shows how the number of firms in England and Wales building 100 or fewer units a year fell significantly over the 24 years preceding 2013.

The government is attempting to put strong solutions in place to solve the issue, but many experts feel more needs to be done before we see the results and numbers needed to solve the UK Housing Crisis.

What I love about this industry is the constant changes and challenges we face, often we look back and find our businesses are stronger as a result.

Take the quality metric for example, lenders decide that they were no longer talking about sales volumes but had a whole new agenda about quality. Huge metrics were drawn up for networks with various combinations with which our appointed representative firms would be measured. Some were so complicated it was difficult to interpret them.

Over time they were tweaked and more information was shared with the networks, as a level of trust was built up for the first time with lenders and their fraud and risk departments.

As a result we all know and understand so much more. We are able to recognise information that needs to be challenged from day one. Many cases that may have potentially been a fraud case don’t get through the door and once you know what to look for, it is so much easier to protect your business and deal with the right clients.

However, one of those metrics has always puzzled me – how can networks and brokers improve on the number of cases that go into arrears?

Divorce, death, illness, redundancy and financial hard times are all reasons for falling behind with payments but they are not events that the broker can predict when arranging a mortgage. It is, however, a relevant discussion to have with the customer and therefore providing protection for them plays an important part in the advice process.

However, it may be time for the lender to accept that if they are unable to give the broker any information on cases that are in arrears, including client name, brokers can do no more to cover this aspect.

The lender holds the data and the lender makes the ultimate decision to lend. They currently have little interest as to whether there is a policy in place to protect the client’s income which could prevent arrears in some cases. Maybe it is time for lenders to not only review the metrics but look at addressing the issue of protecting for the future when arrears may not be as low as they are now.