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Letters Of The Month

MS-LettersLETTER OF THE MONTH: 10 years on? More diversity, niche products — and a Brexit shadow

In response to Mortgage Strategy’s November cover feature, my sense of the world in 10 years’ time is as follows:

  • There will be more lenders, not fewer. With the emergence of more challenger banks actively encouraged, plus the arrival of new non-bank lenders, I predict more lenders overall. However, with access to big data it is likely that more specialist, niche lending will emerge, with products tailored to the needs of a more segmented marketplace.
  • There will be more innovative products. The wealth value of the UK’s housing stock is about £2.5tn and two-thirds of this is in the hands of the over-55s. This trend is not likely to change for the foreseeable future because many older folk will prefer to stay in their home rather than downsize. We may see the emergence of mortgage products that could enable the generational transfer of wealth by putting part of the equity value of a property into a trust in favour of a child or grandchild. This may seem fanciful now but, given that many homeowners are asset rich and cash poor, and with the average price of a house approaching £230K, something that reduces the value of the estate on paper without directly affecting the quality of people’s lives may be attractive.
  • In a more diversified market with a multitude of niche products, there will still be a need for specialist advice. However, the days of the small, individual broker provider may be numbered unless they integrate into mortgage networks. The costs and hurdles to be compliant in so many aspects of conduct and business mean they are in a perilous position.
  • With a more fragmented market, the need for better, faster and easier product sourcing will become a key enabler. These solutions will be able to exploit ‘open banking’, making some of the grunt work easier. But, bearing in mind that what this gives with one hand GDPR [General Data Protection Regulation] may arguably take away with the other, in some instances, for some customers, the time to offer may increase rather than decrease — particularly if they choose not to submit to auto-decisioning and -profiling, necessitating good old-fashioned underwriting.
  • AI/robo-advice may start to gather pace, particularly for straightforward cases, but it is unlikely to overtake broker advice. It is more likely to become a substitute for direct sales staff in more traditional and some non-bank lenders.
  • The failings of the housing market will still be the major cause for house prices to rise, albeit at a slower pace than at present, because there seems to be no serious effort to address the widening gap between supply and demand.
  • House prices have flatlined in regions north of the line between the Severn and The Wash, while those south of that line surpassed their 2006 average prices years ago, reflecting the current economic reality of modern Britain. However, if the economy picks up in a post-Brexit world, we may see a reversal of macro-economic fortunes; and it may be the cities and towns of the North that see prices driven up as 21st-century manufacturing industries are attracted to those areas.

Between then and now, we have Brexit. Whether you are for or against it, it will cast as long a shadow over our economy for the next 10 years as the credit crunch has for the past decade.

I predict that, despite assurances that funding commitments to 2020 will be honoured, a government that is adverse to higher taxation and promotes austerity is unlikely to plug all the spending shortfalls.

My sense is that we will not be shaking the last of the Brexit dirt from our shoes until the 2030s — at which point we will know if we left just before the EU ‘family’ fragmented, or if we left and found ourselves isolated on the outside.

If you think the past 10 years have been one hell of a ride — you ain’t seen nothin’ yet.

Tom O’Connor

‘All self-respecting lenders’ should declare free legals an anathema

None of them can cope, but clients just can’t, or won’t, resist the ‘freebie’. But they certainly do resist when they end up out of pocket and looking for compensation.

It’s all fine and dandy issuing warnings and liability disclaimers, but that’s no way to wrap clients up in a warm, fuzzy overall experience.

For too many years this problem has bubbled away under the surface, inducing huge sighs of relief when a remortgage completion takes place on time.

The commercial logistics are a nightmare. I don’t care what size the conveyancer is, the resource requirement needed to maintain quality completions is way above the paltry margins they’re expected to operate on.

‘Free legals’ is, without doubt, a ‘box-shifter’ service nestling under the wing of financial services. It should be proclaimed an anathema, in these times of ‘best outcome’ requirements, by all self-respecting lenders!

Derek Frost

Nationwide’s entry to lifetime lending receives a qualified welcome

About time the mainstream got involved.

Well done, Nationwide, but why exclusively through Age Solutions? Surely it would be better for clients if all qualified brokers could access the product!

Tony Bicknell

Great news that a new lender has entered the market but why use Age Solutions and not open it up to all brokers? That would be fairer to the industry and, I would have thought, more TCF.

Also, if the clients’ circumstances do not fit the Nationwide criteria, Age Solutions has among the highest broker fees in the market, at 2.25 per cent!

Robert Ducker

‘Past performance is not a guide to future returns’ in relation to retirement lending

When looking at this subject, surveys and statistics based on historical data omit one vital factor: up to now, customers in the ‘over-55s’ sector have predominantly been of the generation that grew up in the ‘job for life’, ‘pay the mortgage as fast as possible’ and ‘buy a property to live in until you die’ cohort.

We are now starting to see the sector change to those who are accustomed to dealing with credit — using credit cards, overdrafts, etc. Not only that but today’s over-55s are much more likely to be aspirational, wanting to travel and experience things that previously were viewed as suitable for a much younger generation, while also still having parents who own property, and anticipating potential inheritances.

George Nicola

Are BTL lenders doing enough to help brokers? In certain cases, no!’

Very frustrating when a lender declines to lend to a landlord of 30 years’ experience with 15 properties, with three unencumbered within his portfolio, no residential mortgage and a personal income of £790K (excluding rental income) — claiming that he is “over-extended”!

Simon Wilkinson



Barclays to take BTL applications from FTBs

Barclays is now taking buy-to-let applications from first-time buyers and non-owner occupiers. The changes mean customers no longer need to own a residential property when buying or remortgaging a buy-to-let property with the lender. The move takes place today, according to a note the lender sent to brokers. The note adds: “This change offers an […]

lifetime lease purchases

What is a lifetime lease purchase?

Lifetime lease purchase deals involve raising finance but not on current properties. Rather, they are taken out when consumers move home. They are called lifetime lease schemes. Although not identical to sell-and-rent-back options, they are unregulated too. Lifetime leases are designed for clients who want to move but either cannot afford to or don’t want […]


Government reveals letting fee ban details

  The Government will bring in draft laws to ban letting fees today, acting on earlier promises to outlaw the charges. The Department for Communities and Local Government says the draft tenant fees bill will help “millions” of renters. The proposed new laws will mean tenants can only be asked to pay their rent and […]

Johnson Fleming is a finalist at UK Pensions Awards 2016

The UK Pensions Awards shine the light on excellence and recognise the advisers, providers and investment managers that offer the highest level of innovation, performance and service to occupational pension schemes and their members. This year’s awards looked at advisers and providers across 31 different categories and were rigorously judged by a panel of senior […]


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