Intelligent Finance fully launched in November 2000 and, with half a million accounts, is now the UK's number one direct bank in the UK. The bank has attained 10.4% of UK net mortgage lending in its first 18 months of trading, with around 76% of the mortgage business placed by advisers – reflecting the bank's focus on the intermediary marketplace. The bank employs around 2,500 at its three Scottish locations in Edinburgh (pictured above), Livingston and its newest facility at Rosyth. Chancellor Gordon Brown performed the opening ceremony of the Rosyth building on July 26.
Q: How is Intelligent Finance structured?
A: Intelligent Finance fully launched as a bank in November 2000. A division of Halifax PLC, the bank offers offset products – mortgages, personal loans, credit cards, savings and current accounts – over the telephone and via the internet. No product is compulsory so customers can choose as few or as many products as they like.
Q: Halifax already has a successful telephone and internet service, so why was there a need for Intelligent Finance?
A: We offer a service over the internet and telephone because of the cost savings that this offers us, which we can then use to offer products at competitive rates. However, the brief from the Halifax was to do something completely different, so we developed the offset banking concept.
With Intelligent Finance, customers can choose to offset their savings and/or current account against their borrowings or can choose to earn the same amount of interest as they pay on an equivalent amount of their borrowings.
Q: As a direct bank, you'll be attracting a certain amount of customers yourselves, so why do you need to sell products through advisers?
A: Some products do lend themselves to direct purchase. However, we still find that people want advice for more complicated purchases – buying a house can be a life-changing decision so clicking a mouse a few times and getting tied into a 25-year deal still frightens many people. In fact, around 76% of mortgages placed with Intelligent Finance come from advisers.
Q: How has Intelligent Finance maintained its growth?
A: Intelligent Finance now has assets and liabilities in excess of £12bn. On mortgages alone, the bank attained 10.4% of the UK net mortgage-lending market. This was high quality business with average mortgage completion balances of £111,000 and an LTV of only 71%.
Over half a million accounts have been opened since launch, with 40,000 new current accounts in 2002 alone.
Q: Not all advisers like to use technology, yet you launched a separate broker website last year. How has this been received?
A: We've been very pleased with the response from www.brokerinfo.
if.com. From launch until June 2002, the website had received over £2bn in mortgage applications and 46,000 personal loans were applied for. It gives brokers the flexibility of placing a case when it suits them.
The security has also been set up in such a way that the broker can access the website from any PC. So they can actually be visiting a client at home, log into the client's PC, fill in the application details and get an approval-in-principle while still online, leaving one happy customer.
Among other benefits, advisers can use the website to track the progress of cases and download marketing literature straight from the site in a high-quality PDF format – ready to hand over to their client.
Q: What is IF's opinion on trade associations for mortgage brokers?
A: Trade associations are very important provided they do more than negotiate product supply arrangements. They need to do what the name implies and represent their membership on industry issues.
For example, they need to focus on their members' readiness to gain mortgage qualifications but, just as importantly, advise them on the changing environment in respect to money laundering, data protection, etc. Product providers are having to change quite radically and it seems that, in a number of instances, professional advisers are a little behind the times on these issues. Trade associations can play a major part in this communication exercise.
Q: A recent CML survey indicated that nearly half of those with a flexible mortgage had not used any of the features. Does this mean that these products are just fads?
A: Actually, most customers use the main feature without realising it and that's daily interest calculation. However, the aim of a flexible mortgage is to have the facility there should the customer need it.
Just because a customer hasn't yet made use of their flexible features – such as varying repayments or withdrawing equity – doesn't mean that they won't take advantage of it in the future. Life is not black and white and people's circumstances can – and do – change.
Our mortgage is flexible but it's the ability to offset that's really appealing. More than one in 10 of our customers who have both savings and borrowings at Intelligent Finance are paying no interest on all their borrowings.
Q: Intelligent Finance has been running study-tips seminars to help advisers through the mortgage exams. Do you think the industry is ready for the end-of-year deadline?
A: There's been a lot of publicity around these exams but we still think a lot of brokers believe their own life experience will be enough to pass. It won't. These exams are very hard and are designed to cross over the financial services industry, so examiners are looking for a lender's viewpoint or to cover parts of the mortgage process that brokers don't normally deal with.
What's more, it won't end with exams. The MCCB wants advisers to maintain their knowledge levels post 2002 and will require them to prove a required amount of continuing professional development (CPD). This will require a significant amount of ongoing commitment from advisers.
We worked with the Chartered Institute of Bankers in Scotland this year to highlight the mortgage exams and it has launched the Professional Mortgage Adviser kitemark or PMA. Qualifying brokers who have passed their mortgage exams and register with the institute are able to display this kitemark on all their literature in return for undertaking 35 hours of CPD each year.
The good news is that reading informative trade magazines such as Mortgage Strategy can be included for the CPD points.
Q: Regulation is obviously going to cause some big changes to the industry. What's IF's view?
A: For the first time, regulatory changes are affecting intermediaries as much as – if not more than – lenders. Advisers need to brush up on understanding issues such as money laundering, determining affordability and such.
Q: Do you think the buy-to-let sector should be regulated?
A: There has been a substantial increase in buy-to-let mortgages over the past few years, with an increasing number of consumers becoming first-time landlords. The issues to consider are complex and the potential pitfalls huge, and we believe that buy-to-let should be regulated.