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If you want to talk to us, please use one of the numbers below:

For new business enquires:

Gemma Reynolds: 01799 582925

John Charcol, L&G, L&G Mortgage Club and all affiliated firms, LargeMortgageLoans.com

email: gemma.reynolds@saffronbs.co.uk

Katie Sharpe: 01799 582923

Impact Specialist Finance, Intrinsic, PMS Club, Sesame, Tenet

email: katie.sharpe@saffronbs.co.uk

Holly Andrews: 01799 582885

3mc; 3mc Club, Brightstar; Brightstar Club, Complete FS, Knight Frank Finance, Mortgage Intelligence, Next Intelligence, Platinum Options, Positive Lending (UK) Ltd; Positive Lending Club, Private Finance, Private Label, Sammon Mortgage Management Ltd, TBMC, TMA Mortgage Club, Vantage Finance

email: holly.andrews@saffronbs.co.uk

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Mortgage Team: 01799 582966

email: mortgage.processing@saffronbs.co.uk

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Blog

Lending into retirement

In our daily conversations with brokers there is always one common talking point they raise: “what new, innovative products can we offer our customers?”

One area that Saffron has been exploring with interest is ‘Lending into Retirement’. We have now launched a ‘new’ mortgage option for an ‘older’ customer; a mortgage for those who are looking to downsize and pay their mortgage off month by month once retirement is in progress. This product area gives brokers a golden opportunity to help service the lending requirements of an *increasing number of older households.

Retirement, and our lifestyle in retirement, is changing. In the past, retirement was predetermined. People stopped working in their 60s, and began to live off their pension. This was all very predictable; the period of retirement was defined, and could be short.

Life expectancy

In 1982, average life expectancy in the UK was 72 — just seven years beyond men’s default retirement age of 65. Now, people can choose when they leave the workforce and can plan how they wish to live their lives after full time employment1. People live longer than they used to and also longer than they expect.

Last year a study showed that people in their 50s and 60s underestimate their chances of reaching 75 years of age. For example, men born in the 1940s were interviewed and only 65 per cent thought they would reach the age of 75. The actual figure achieving this age was 83 per cent. For women, their estimate was indicated that 65 per cent would reach an age of 75 but the actual figure was 89 per cent2.

Flexible working

The idea of stopping work at retirement is also changing. In a separate study, two-thirds regard work beyond state pension age as an excellent way of keeping an active mind. Just over three-quarters want to work part-time before retiring completely3. The population as a whole are increasingly looking to alter their working patterns as they get older and to continue to earn money in a flexible manner to fit in with their lifestyle. Retirement now means choice rather than limited options.

At Saffron we believe the providers of financial services need to adapt with the times. We believe in doing more to support the ambition and lifestyles of people in the modern world.

Moving home

Some people don’t think it’s possible to get a mortgage in their 50s and 60s as retirement approaches. At Saffron though, we don’t believe you should be limited by your age and we like to be flexible. Your customers may be over 40 and have seen a property they want to call home, but lenders have already said no. We say, let’s talk further and see what we can do to help.

Lending into retirement

We have just launched our ‘Lending into Retirement – Downsizing’ mortgage, a standard interest-only mortgage with a difference. As the name suggests, it is available to customers who are hoping to borrow into their retirement. This mortgage stands out, as it allows your clients to downsize and pay off their loan during their retirement.

This repayment method and a wide variety of retirement incomes will also be considered. All applications will be individually assessed by one of our expert underwriters. Our aim is to help your clients to work out what is possible.

Customers need a minimum equity in their property of £250,000 but we will consider applications below this level when alternative assets are taken into account. We may also be able to accept a lower equity limit, depending on location.

What’s important to us is to learn about your clients’ circumstances, and then we can work out what we can do to help.

Where to go for help

Full product details. Brokers can easily submit a case via our online broker portal.

If you have any questions please speak with our Business Development Mangers, who will be happy to help:

Holly Andrews: 01799 582885
Katie Sharpe: 01799 582923
Gemma Reynolds: 01799 582925

*Older households set to rise: Daily Moneyfacts Bulletin, 21 September 2018 – The number of households in England is expected to rise by 4m (17%) over the next 25 years, according to the ONS, equating to 159,000 more households a year. Those headed by someone over 65 will make up 88% of this growth, with a rise of 54% predicted by 2041, while those headed by someone under 65 will grow just 3%.

Source:
1 HR Magazine, AON, Jan 2019
2 Independent, April 2018
3 Express, May 2018

2019 – The year of the self-build?

Brokers to benefit from increasing demand for Self-build Mortgages

By Anita Arch, Head of Mortgage Sales, Saffron Building Society

The recent festivities may seem a distant memory now but for many it was a unique time for rest, relaxation and the chance to consider new opportunities for 2019.

Big decisions such as changing career; relationships being taken to the next stage – should we move in together?; whether to start a family; stepping onto the property ladder for the first time or buying that ‘forever home’ are all big life choices many will have considered over the holiday season.

At Saffron we often hear that mortgage brokers see an upturn in enquiries following a holiday period where their customers have had time to think and consider the future. What we are also seeing is further diversification in property buying and the types of mortgages intermediaries are assessing for their customers. Self-build mortgages are one specialist area growing in popularity.

A self-build property can feel unobtainable to many as it reminds them of Kevin McLeod from Grand Designs discussing a multi-million pound project overlooking the sea. However, the popularity of self-build projects is starting to grow and there is more and more support available to turn more modest ideas into reality.

Self-build properties are cheaper

The average self-builder saves 15% to 20% on what it would cost to buy the same property1. With such huge savings and the ability to create your own space to live in, it’s increasingly becoming a more viable option for many.

A self-build property doesn’t need not be a ‘grand design’. It can be a renovation to your customer’s existing property, or a conversion to a barn or basement, loft or garage. In essence, any large extension could be classified as a self-build construction.

How we can help

Saffron has years of experience providing finance for people looking to build their own homes. We can support you and your customers along the way with a mortgage which will release funds at several stages as the build progresses. We also have lots of useful information on our website, including our Intermediary Guide to Self Build Mortgages.

If you want to know more about our Self Build Mortgages, product details can be found here. Brokers can easily submit a case via our Online Broker Portal.

If you have any questions please speak with our Business Development Mangers, who will be happy to help:

Holly Andrews: 01799 582885
Katie Sharpe: 01799 582923
Gemma Reynolds: 01799 582925

Sources:
1 National Custom and Self Build Association (NaCSBA)

Understanding the next generation of home owners

I read an article recently which reported that over a third (35%) of people born between 1980 and 1995 prioritise saving for a deposit on a home over their retirement1. The next generation of homeowners has not lost its appetite for property ownership but, as we all know, the ability of first time buyers to get their finances in a position to secure a mortgage is difficult. I thought it would be useful to research this generation of people to get a better understanding of what they really think about their future prospects.

By now you may have realised that I’m talking about millennials. What I’ve discovered, from some excellent reports I found, is that this over used word carries an enormous amount of prejudice and misconception. However, if we are to be able to help the next generation on to the housing ladder then, as an industry, we need to be able to understand what motivates this demographic. Only then can we begin to identify the products and services which can support them and deliver what they need.

Financial worries

Millennials are the first modern generation to be worse off than their parents. A report by The Resolution Foundation2 argues the squeeze on disposable income for millennials cannot just be attributed to the recession. Various shifts and changes in the structure and characteristics of employment explains their weaker position.

Millennials are more likely to be working in ‘non-standard’ or ‘insecure’ employment. At 25, one fifth (20%) of Millennials who had reached that age worked part-time compared to just 15% of the previous generation (Generation X). More Millennials work in less well paid industries, such as hospitality, retail and transport and there has been a drop in starting pay and lower levels of job mobility. Factors such as these can help explain the stunted growth of Millennial salaries.

Psychology

According to a study from KPMG, millennials need to know the reason for doing a task before they do it. As the generation of immediate gains, they prefer to understand the value of doing something upfront before they set off. Why should they invest their time in a task and how does it fit into the bigger picture? This need to understand the reason for doing things can translate into an impatience with unnecessary process.
Millennials are more confident when it comes to challenging the system. They are less afraid to ask questions, make comparisons or question ‘the norm’ of things. If they’re thinking something, they’re most likely to express it.

In the job market, millennials stay within a given role for a maximum of three years. With the degree of networking, peer-to-peer comparison and the ability to find new employment online it’s not surprising to understand how quickly millennials become eager for the next challenge. In addition, there is a stronger desire to have a work-life balance. The previous generation hoped for work-life balance. Millennials simply demand it and it’s expected as a norm on any job specification.

Technology & Globalisation

The internet was born at the same time as millennials and evolved with them. As a result, millennials are considered to be digital experts and the world’s first connected generation. They expect to be able to use digital devices for all their financial services requirements. Not only that, they expect the service to be quick and simple to use. Any flaws in the experience will leave them looking for alternative options.

In addition, millennials accept and embrace globalisation. They travel more frequently than past generations, and aspire to own a home and potentially move and live overseas. Their goal is a flexible lifestyle and they expect to be able to access products which will help them achieve it. They perceive Brexit to have the potential to damage the chances of both, which is why this generation is so angry about the current direction of political travel.

What does this all mean?

It’s wrong to categorise all people born between 1980 and 1995 as having precisely the same set of characteristics. However, the research can give us an indication of behaviour and guide the industry in developing products and services for this generation. I would summarise the four key considerations as follows:
1. Millennials live at home longer. This delays their move to purchasing a house of their own but puts pressure on the family to accommodate young adults at home. Could there be a product which enables you to extend the family home in the short to medium term and helps to save for the equity for a first time purchase?
2. There is going to be more flexible working as millennials regularly shift from one job to another. This means an increase in complex income and contract work.
3. The sales process for a mortgage will need to explain what and why things happen in the application process. Research shows that three out of ten homeowners become stressed by mortgage applications4. Brokers and lenders will be able to gain market share if they can provide an unrivalled experience. Positive customer experience has a high chance of being shared amongst peers, colleagues and friends via social media via social media.
4. Digital services will be increasingly important and the service should be flawless.
Millennials have the same aspirations for property ownership as their parents. If the right propositions are designed around their unique characteristics then lenders and brokers will be well placed to help the next generation of home owners.

Is 2019 The Year Of The Developer?

Developers are nervous about the year ahead but can see opportunities, which gives them cause for optimism. Although things are expected to be volatile and uncertain, the outlook is not pessimistic. That’s the key message we took from one of our recent round table events, where we invite people from the industry to talk about trends, issues and opportunities. I wanted to share some of the findings with you as I see the Development segment of the market as one where there could be growing demand for brokers.

The housing market

As you’ll no doubt be aware, the government has set itself an ambitious home building target to ease the housing crisis. Rather unhelpfully to the people in charge, their targets and forecasting came under serious pressure last year. In July, a survey by Knight Frank1 concluded that almost 90% of housebuilders believe that construction of 250,000 additional homes a year is the most that can be achieved by 2022, 50,000 short of the government’s 300,000 target.

In addition, The Telegraph reported on 2nd September that the Government’s housing target may be too high after The Office for National Statistics forecasted that fewer new households would be required than had previously been thought. Oxford Economics claimed that the original projections and “hysterical” discussions of the housing shortages had been unjustified.

One thing is clear. While people may disagree about the projections and the number of houses that can be built each year, we all agree on the need for more. This should come as music to the ears of developers, but we found out that things aren’t as straightforward as they used to be.

Business Planning

Planning the economics of a development has become extremely difficult, and this is being driven by two factors. The first is the increasing volatility in material and labour costs. It was reported in September 2018 that building costs had increased by just under 5% over the previous 12 months3. More expensive imported materials and components remained a significant driver of cost inflation, attributable to the fall in the value of Sterling.

Labour costs also continued to rise steadily too, with contractors reporting difficulty in recruiting skilled labour, particularly carpenters and bricklayers. In our round table discussion one developer told a story which brought this aspect to life. He explained that finding reliable bricklayers had become extremely difficult. In one example, he explained that he had agreed a price of £200 per day for a team but they didn’t turn up as they received a better offer from another developer. Eventually, he had to pay £450 per day to make sure he could secure the labour he needed.

Modern Methods of Construction

Modern construction methods have been heralded for their potential to provide high quality housing quickly. The Royal Institution of Chartered Surveyors (RICS) released a paper last year urging the government and construction industry to boost diversity in construction skills by embracing modern methods. In this country we are slow to embrace new ways of building homes, and one developer contrasted this with the European approach where self-build, custom build and developments all use new technology. However, change is coming.

Developers are changing their attitude but this presents a challenge for the lending industry. It was indicated that if modern methods are to be adopted, lenders will need to be convinced that the property is capable of being mortgaged by conventional mortgage providers. Modern techniques can make some lenders nervous as they have to feel confident about the long-term value of the property. As a broker, it is important to keep this in mind when dealing with developers and self-builders.

Lending Culture

Brokers and developers at the event talked about the different types of lending model they had experienced. They categorised this as a relationship or transactional model, with some lenders looking to build a long-term relationship with developers, and others lending in a highly commercial way with numbers driving all decision making.

There was concern among developers that lenders employing a transactional approach will be the first to pull away the rug if there is a recession. At Saffron, our aim is always to be as flexible as possible and keep our eye on building long-term relationships. We think it’s important that brokers, developers and lenders work closely together to avoid any surprises and to make sure that everyone buys into the plan. The experienced developers in the room talked about bad experiences in the last housing crash, when they felt that lenders were reacting prematurely.

The Year Ahead

There is great demand for developers to increase the number of properties but the current global uncertainty makes planning difficult. For brokers, the development market could be a buoyant part of the industry but our experience tells us that 2019 could be another volatile year.

As Safe As Houses – The Future of Home Ownership

The UK once considered home ownership the norm. For my generation, and the generation before, the clamour to get on the property ladder was natural and continuous. But economic changes since the 2008 financial crash have ripped up the home ownership rule book.

In 2017 The Guardian reported that workers in the UK saw their wages fall by 1% a year in the period following the 2008 crisis¹. Alongside wage deflation, house prices have continued to steam ahead at an unrelenting pace until this year when the brakes began to be applied. Many people are predicting doom and gloom for the future but I believe that periods of difficulty often produce the brightest innovations to overcome challenges we face.

So what does the future look like?

Is home ownership still accessible?

What can the industry do to help?

The economic argument for home ownership

Research shows that the average price of renting a property is now higher than average mortgage repayments in every region of the UK2. The average rent now stands at £912 per household, compared to average monthly mortgage repayments of £723 for first-time buyers. On the face of it, renting a property does not make financial sense. Your cost of living increases and you are not investing in an asset that could benefit you in the future.

This is Money examined the returns of different asset classes over a thirty year period, and the value of property not only as a home but also as an investment was evident. The stock market yielded an annualised return of 9.9% (with dividends re-invested) and 5.9% (without dividends re-invested). By contrast, the returns of residential property were 5.7%3.

While we know that past performance is no guide to future returns, the economic argument for owning your own home may never have been stronger. Aside from the economic benefits, many studies claim that being grounded in a community in a home you own enhances wellbeing.

The barriers

The largest obstacle that many people face, especially first-time buyers, is the deposit. According to a BBC study4, in most regions it would take about eight years for the typical buyer to save for a deposit. This rises to nine years in the South East of England and nearly ten in London. Many young people look at a time horizon like that and simply lose hope if they are unable to draw upon the ‘Bank of Mum and Dad’.

The financial commitment of a large mortgage can sometimes outweigh the psychological benefits of being part of a community and owning your own bricks and mortar. However, no real conclusion can be drawn about these two conflicting sides of the same coin and each person would feel differently.

Nonetheless, the idea of buying a house when you’re 20, moving once in your life and maybe clearing your mortgage in your mid-forties is less achievable than it once was.

The future

Home ownership has not suddenly become a bad idea but is no longer the simple matter that it once was. I believe that the industry needs to take a fresh look at how we are supplying financial services to people of different ages, and how we can help them to achieve their aims of owning a property. I believe the industry used to be constrained by its IT systems, which meant that services could not be offered flexibly. This is the primary reason why at Saffron Building Society we have invested in our infrastructure. This will enable us to create products around the needs of the individual, rather than lining up a set of items to choose from like food in a supermarket.

Migrating to a new IT platform is risky and costly. You only need to look at the pain experienced by TSB. Thankfully, we are through that now and positioning ourselves to innovate in the market. But what will the future look like?

I think a number of themes could dominate in the coming years.

A Mortgage for life

People will adapt to the fact that they will be paying a mortgage for longer than the 25 years that our parents expected. 40 year mortgages will be more common and maybe there will be some life long mortgages. In the same way that some students never expect to pay off their loans, mortgages could go the same way.

However, the housing assets gained will be worth much more than those of our parents, and could be the source of income for retirement or for the housing of future generations. Equity release acquired a terrible name just over 20 years ago, however the world has moved on and it’s a real option for people today. I expect that product development based on needs rather than short-term income will produce major areas of innovation in this space.

Rewarding Loyalty

Mortgages will no longer be a product on their own. Currently, home owners are always looking for the best deal and switching between products. This is time consuming, and also expensive for the lender.

As Open Banking provides more context and analysis of people’s lifestyles and expenditure, lenders will understand better who they are dealing with and be able to offer bespoke pricing. This will reward loyalty and prudence and customers won’t need to look around so much. The churn costs of managing a mortgage book that is constantly revolving will be reduced. Lenders could be in a position to reduce the costs.

Brokers

This change could feel like a threat to brokers. After all, their purpose at present is to hunt out the best deal for their customers on a regular basis. However, I think the role of brokers could change as they too evolve into genuine financial planners, helping the nation’s home owners plan their finances. A forty to fifty year time horizon will become the norm rather than focusing on a product for the next couple of years.

Financial planning legislation has failed in recent years, with the unintended consequence of removing advice from the reach of the mass market. Only the wealthy now have access to good advice, but as the complexity of financial arrangements increases, I suspect the regulator will re-think the approach. This will open up a new segment for those with skills and experience in financial advising.

I see a big role for brokers in the future as they look to build long-term strategies for people outside the usual constraints of product selection. And I think they will thrive in an environment where lenders and brokers share more data and collaborate on designing products for complex needs.

When will this future arrive?

At Saffron, we are planning for the future right now. Many commentators I read create headlines by proclaiming that rapid and fundamental shifts are just around the corner. Experience tells me that change in industry often happens more slowly than people predict, but that shouldn’t be reason to wait. I believe that planning to be at the forefront, rather than lagging behind, pays dividends in the long term.

Colin Field
Chief Executive Officer, Saffron Building Society

Source:
1 UK workers’ wages fell 1% a year between 2008 and 2015, Guardian
2 Renting now more expensive than buying in all areas of UK, Mortgage Strategy
3 What’s done best – cash, stocks or bricks and mortar?, This is Money
4 Buying a home: How long does it take to save a deposit? BBC

Open Banking – old news or about to change the mortgage industry?

At the start of the year, new Open Banking protocols were predicted to shake up the banking sector and pave the way for widespread changes in the mortgage market. As the year draws to a close these predictions seem a long way off the mark. Like many industry predictions, Open Banking was described as something which would yield earth-shattering changes. In my experience though, the reality is that change is evolutionary and not revolutionary. Open Banking hasn’t turned the mortgage market on its head but I feel it will bring about change that we all need to be ready for.

Before examining some of the trends we are starting to see, let’s begin with a quick reminder of what Open Banking is all about and where it came from.

What exactly is Open Banking?

Open Banking is a series of reforms to how banks deal with financial information. It was called for by the Competition and Markets Authority (CMA) and comes alongside the second Payment Services Directive (PSD2). Both came into force on 13 January 2018.

Together they mean that all UK-regulated banks will have to let you share financial data such as your spending habits, regular payments and companies you use with authorised providers offering budgeting apps, or other banks – as long as you give your permission. The objective is to bring more competition and innovation to financial services which, in turn, is hoped will lead to more and better products to help manage people’s money.

What has happened so far

According to statistics from the Open Banking Implementation Authority (OBIE), there were 720,000 uses of open banking APIs in May 2018 and this increased to 1.2 million in June2. A report by PwC and the Open Data Institute into the first six months of Open Banking found that by 2022 the market could be generating £7.2 billion. The research also found that while only 18% of consumers are currently aware of what Open Banking means for them, this should reach 64% by 2022.

As with any new technology there have been some early adopters, and while the implementation of new propositions and usage has been slow, the pace is increasing. HSBC were the first to launch an open banking app with their Connected Money4. Connected Money enables consumers to see all of their current, savings and mortgage accounts from more than 20 banks.

The Facebook/Cambridge Analytica scandal which occurred earlier this year caused great concern about the use of personal data. The general public are now much more aware of how data can be used (and abused) and understand it much better. Any progress in Open Banking will therefore be slow unless the industry can reassure consumers that data is being used to benefit them and is totally safe and secure.

What to look out for in the mortgage industry

The biggest impact Open Banking will have is to change the mortgage sales process. By enabling third party services such as online income verification and electronic valuations, which link directly into the lenders’ mortgage platforms, Open Banking will reduce the need for keying information and a reliance on paper documentation. This is clearly great news for brokers as it reduces the amount of time wasted in the search and application process.

According to the Financial Reporter5, 55% of lenders are hoping that Open Banking will increase efficiency and cut costs from the sales process. In addition, 62% of lenders are investing in mortgage hub technology and half are implementing, or actively reviewing, Open Banking functionality within the mortgage sales process.

If the processing time were deducted from a broker’s working day it would leave more time to concentrate on offering good advice and developing stronger service propositions with customers. At Saffron Building Society, we believe that technology will change the way that consumer finance operates in the future. While it will be more efficient to transact, people will need more guidance in an age when employment will be increasingly complex and unpredictable. We think that brokers will have a huge role in helping the nation’s homeowners to plan their long-term finances. If brokers adapt, and look at the broader financial landscape, they have the opportunity to offer invaluable support to homeowners.

In recent years financial planning legislation has failed, with the unintended consequence of removing advice from the mass market. Currently, only the wealthy now have access to good advice. But as the complexity of financial arrangements increases, we think the regulator will review the approach. This will open up a new segment for those with skills and experience in financial advising.

Evolution, not revolution

I think that the importance of Open Banking will increase relatively slowly. However, failing to react now can store up future problems for businesses and brokers. Laggards could be lulled into a false sense of security as nothing immediately will have changed, but those who stay ahead of developments and invest in skills and technology will reap large rewards. Those who prepare will minimise the risk of failure.

The Growing Importance of Self-Employed Mortgages

The rapid growth of self-employment has been a feature of the UK workforce in recent years. This is nothing new and no doubt you’ve read about it, but it’s worth looking at the numbers to put this into context. According to the Office for National Statistics, the number of people classified as self-employed increased from 3.3 million people in 2001 to 4.8 million in 2017. At the same time, the unemployment rate fell to 4.3% in the three months to November 2017, the lowest level since 1975.

However, the number classified as self-employed has been called into question following a court hearing in June of this year. A group of 65 Hermes couriers took the delivery service to a tribunal after they said they had been denied basic workers’ rights. The tribunal found that the couriers were not independent contractors, which Hermes claimed, but instead were workers entitled to rights such as the national living wage and holiday pay. The decision was described by the GMB union as a ‘landmark’ ruling.

Tim Roache, GMB general secretary, said: “This is yet another ruling that shows the gig economy for what it is – old-fashioned exploitation under a shiny new facade…not only will this judgement directly affect more than 14,000 Hermes couriers across the country, it’s another nail in the coffin of the exploitative bogus self-employment model which is increasingly rife across the UK.”

There are other examples which highlight the change in people’s working lives. At Saffron Building Society, we had what I would describe as a classic application from an NHS doctor. The applicant was a GP and worked for two surgeries with two separate fixed-term contracts. She also did locum work, out-of-hours work and work in A&E at the local hospital.

The individual had initially received a positive response from a mortgage broker, but soon found out that the complexity of her income was going to be a real problem with lenders. The broker couldn’t find someone willing to lend. We spoke to her after a second mortgage broker had encountered the same issues and was unable to secure a mortgage.

As the largest employer in the country, the NHS is an interesting case. Not only do they employ 1.5 million people but their remuneration structure is complicated. According to the Financial Reporter, doctors and nurses often combine their earnings between basic rate income, NHS bonus income and private practice work. Consultants, as an example, can be paid up to £77,000 in additional annual bonuses on top of their basic salary. In total, 22,800, some 52% of consultants in England received a bonus between £17,000 and £77,000 last year. And this is before the inclusion of extra earned income from private work on top of their NHS earnings. A sideline in private practice is a popular move amongst NHS doctors and nurses.

The implications are clear for the industry – there are a number of questions that we need to ask and issues we need to be prepared for:

1. Historic classifications of employment are becoming blurred. When is a self-employed person self-employed? Depending on who forms the next government, will the amount of ‘self-employed’ people shrink overnight due to legislative changes?

2. Is the industry able to operate in the same manner that it once did? Rather than classifications of mortgage products such as ‘contractor’ mortgages or ‘self-employed’ mortgages, will there just be ‘mortgages’? Will the decision be made after a more detailed look at the individual’s circumstances and history and will it replace the current process?

3. There is lots of talk in the industry about robo-advice and the rise of artificial intelligence. But are computers able to deal with the judgements required in an increasingly dynamic environment? The pace of change is unrelenting. Whilst computers can make decisions on many cases, will they be able to adapt at enough pace to make sense of the changing classifications and income streams?

4. As political uncertainty increases, will there be more volatility to come in house prices and the amount of people in work?

Alan Perlis was an American computer scientist who famously said the following about complexity:

“Fools ignore complexity. Pragmatists suffer it. Some can avoid it. Geniuses remove it.”

The industry is going to have to grapple with a highly complex landscape going forward. Whilst I’d like to sell myself as the genius who is going to remove it, I know in reality that this is a problem the industry is going to have to work hard to solve. Fools and pragmatists are going to have a difficult time and I don’t believe there is a way to avoid it.

At Saffron Building Society we use technology for straightforward applications, but ask our highly experienced underwriting team to analyse each and every referral from the system. This enables us to make judgements that others have been too nervous to take a decision on. We were able to accept the application from the NHS doctor. We’re pleased to help her secure her first home.

Whilst people are talking up the concept of robo-advice, I am of the view that experienced judgement from a human being, working alongside technology, will be the way forward. Whilst not removing complexity, it will be better able to deal with it.

Anita Arch
Head of Mortgage Sales

Self-Build Mortgages – Discounted Rates

For a limited time only, our self-build mortgage has been reduced from 4.45% (variable) to 4.20% (variable). We know there is growing demand for self-build homes and we want to support our brokers and their customers who are keen to go it alone on a building project.

Self-Build on the rise

Research reveals that self-build is growing in popularity and a survey by Ipsos MORI shows that one in seven people in the UK expects to look into building their own home. That equates to around 7 million homeowners or more than 10% of the UK population. Additionally, people are no longer in love with the housing offered by larger house builders.

Problems with Self-Build

Many first-time self-builders lack experience and don’t have an adequate plan and budget in place. This can make it frustrating for you and your customers as you get bounced around trying to present the right information for a mortgage application. However, at Saffron Building Society we can work with you to make the process much, much easier.

We do things differently

We don’t have a prescriptive application approach that outlines where and when payments will be released. We will also take the time to talk with you and your customer to work out a flexible plan. Our specialist self-build underwriters review each application and can work with you to build a plan around your customer’s project. In addition…

  • We can consider up to five times income on applications
  • Unlike many providers, we accept first time buyers
  • We accept custom-build developments.

How we can help

If you want to speak to one of our specialists, and to take advantage of this limited offer our broker support team is available to take any questions, please do get in touch at Broker Support if you need anything.

Holly Andrews: 01799 582885
Gemma Reynolds: 01799 582925
Katie Sharpe: 01799 582923

Alternatively, you can download our Intermediary Guide to Self Build Mortgages for more information.

Volatility and adapting to the future

I’ve never been one for overreaction when there is a release of numbers. I firmly believe in trying to steer a steady course. Staying calm isn’t always easy; the spring statistics were certainly discouraging. A Royal Institution of Chartered Surveyors report found that demand from buyers, and new instructions from sellers, were at their lowest since 2013. The report described how the UK market being affected by the poor weather, fears about the Brexit negotiations, and even bitter infighting among estate agents to get properties on their books.

The forecast did not look good; the weather and the industry were pointing to a stormy future.

A balanced view

Warren Buffet is one of the most successful investors of all time. Among his many great comments about investing I felt this was appropriate:

“Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”

We are living through volatile times. I think it’s vital that, as an industry, we keep the panic button at arm’s length when things get tough and the champagne on ice at the first sign of good news. If we all accept volatility in the near future and beyond, then we can stop the herd mentality that can precipitate a crash or a boom. As certain as night follows day, there will be a sage somewhere predicting an extreme event just around the corner and for this reason we need to take a balanced view.

Careful analysis

Volatile markets demand careful analysis to see whether what we read in the news does actually indicate a fundamental shift in patterns of behaviour. I think there are many good reasons to be cautiously positive about the future as there are niches which are showing growth potential. For example, the first time buyers segment has seen some green shoots springing up as it responds to the summer warmth.

In May, The National Landlord Association claimed that a significant number of homes suitable for first time buyers could ‘flood’ the market in the coming year. They estimated that approximately 380,000 landlords planned to offload a property. The report also showed that 45% of landlords who intend to sell property in the coming year plan to sell individual flats and apartments, with a third looking to sell terraced homes. These, as we know, are typically affordable options for those taking their first steps on the property ladder. Clearly, not great news for the Buy to Let sector but an opportunity for the first time buyers.

Deeper analysis

Research from Santander Mortgages highlighted that average rental prices are now higher than average mortgage repayments in every region of the UK. According to Santander, the average rent in the UK is now just over £900 per household. Compare this to monthly mortgage repayments of £723 for the average first time buyer and it’s clear that buying can cost less. The saving equates to £189 a month, or £2,268 a year for the typical first-time buyer.

At this point, I’m not opening the champagne. However, I am suggesting that despite the spring headlines we are seeing encouraging data from certain parts of the industry. While there may be more properties available, and home ownership is less expensive than renting, significant barriers to ownership still remain in the high cost of deposits or the ability to access mortgage finance.
This is where the industry needs to be creative and look for new solutions to help.

Let’s focus on innovation

In my view, we should stop worrying about what the forecasters have to say. We should stop reacting to emotive headlines. We should focus on innovation to adapt to the needs and demands of a new generation trying to manage in a period of great economic volatility.

At Saffron Building Society, our focus is on ways we can help customers. For example, we have a policy of accepting gifted deposits on all of our mortgages as a way of breaking down the barriers for first time buyers. This policy is designed to help parents and grandparents give their relations a boost to get on to the ladder.

We are also exploring new ways to price our products and have invested in our core systems to enable more flexibility. We think flexibility to build bespoke products is going to be an important feature in the future.

Warren Buffett once said:

“Only when the tide goes out do you discover who’s been swimming naked.”

If the industry thinks long term and innovates, avoiding knee-jerk reactions to the news, we can be more confident that we’ll be able to weather volatile conditions and avoid being caught with our trunks down.

Expat Buy To Let – a major growth opportunity

One of the most common requests we get at Saffron Building Society is for Expat Buy to Let mortgages. According to the Office of National Statistics, since the EU referendum in 2016 there has been less immigration, but more UK nationals have decided to uproot and move overseas. In June 2016, 95,000 people left the UK and it was estimated that by September 2017 this had risen to 135,000.

The Expat Buy to Let segment is booming as more people leave the UK but still want to take an income from UK property or let their house while overseas. The application process is very similar in some respects to that for a normal buy to let mortgage but there are certain rules and nuances which apply. I want to give you a whistle-stop tour of some of the pitfalls and problems that can occur with this type of product, and I hope it might save you some time when dealing with applications.

Where are they now?

Is your applicant still here or overseas? One of the problems brokers can encounter is that they start the application before their customer has moved overseas and are unable to confirm their new address. Lenders may need evidence that applicants are already living overseas. If they can’t supply evidence then they may be ineligible for the mortgage until they are settled in their new residence abroad. It pays to double check their location up front if the lender so requires.

Country Restrictions

At Saffron Building Society we don’t have a list of specific country restrictions but applicants must be able to prove they live abroad. We look at applications individually and make a decision on their circumstances. However, many lenders do have country restrictions in place and publish a list of countries for which they will not consider mortgage applications.

Income

Some Expat Buy to Let mortgages will stipulate a minimum income in addition to sufficient rental income. Just like a standard buy to let product, this will vary from one lender to the next. For experienced overseas investors this is not normally a problem, but if applicants are overseas on a medium-term work assignment, and looking to invest in property while away, they may not always have thought through the numbers in detail. This is a common cause of failed applications.

Proof of residency

Those living in Middle East and in Arab countries will often use a PO Box as their address. While this is not an insurmountable problem, proof of residency can be more complicated in this region. An experienced lender will be able to advise you about how to deal with Middle Eastern applications. It’s also worth bearing in mind that proof of residency is a common cause for delay, so inform people of this requirement at the start. Briefing your customers, and getting them started straight away, will avoid unnecessary hold ups.

Unsuitable property

While there may be great demand for people wanting to rent a thatched cottage in the Cotswolds, it may present a problem for many lenders. A detailed understanding of the kind of property involved will quickly help you narrow the search or even eliminate problem applications.

People don’t want Buy to Let

You may be surprised to hear that some people start an application for an Expat Buy to Let mortgage but fail to disclose that this is for a residential purchase. This quickly becomes apparent when proof of overseas residency is unavailable. As obvious as this may seem, clarifying the use of the property will save you a lot of wasted effort at the start.

Nominated Solicitor

Lenders need some certainty that they can contact the applicant in the event of future problems or default. When the customer is living overseas the communication can be more difficult. Lenders may insist on using a UK solicitor, including specific restrictions on the size of the practice, to whom they can serve notice in the event of a default. This has the potential to block the application if your customer is unable or unwilling to comply.

Conclusion

I have read one report suggesting that there has been a 30% rise in demand for Expat Buy to Let mortgages every year. The UK property market is still regarded as a good prospect for growth by many and the additional three per cent stamp duty has not deterred investors.

The Expat Buy to Let sector is complicated and applications can be time consuming. However, by asking the right questions you’ll be able to identify those genuinely in a position to apply and you can tap into a buoyant and growing sector of the market.

View our Expat BTL Mortgages

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