Mortgage Market Roundup - October 22
Mortgage shock comes for UK homebuyers. Borrowers who opted for popular two-year fixed rate deals during the pandemic, when relief on stamp duty...
Mortgage Market Roundup
Homebuyer demand levels drop in Q3, with a 5% decline since Q2 (7% drop compared to last year), as economic pressures and the increased cost of borrowing makes customers reconsider – GetAgent.
New buyer interest falls for fifth month in a row in September amid deteriorating macro conditions and the outlook for interest rates – Royal Institution of Chartered Surveyors (Rics).
Annual mortgage payments up 19% since last year coming to £16,629, representing the second largest increase in household bills after annual energy bills, which have risen 54% from £1,277 to
£1,971 per month – Revolution Brokers.
Mortgage payments set to rise by £300 per month by 2023 for those coming to the end of their mortgage deal, with mortgage rates forecast to climb as high as 6% – Octane Capital.
UK mortgage borrowers face massive squeeze given that “An increase in mortgage rates to 6% would take repayment affordability above the level immediately prior to the 2007 downturn and just below the peak level in 1990. With the rapid rise in mortgage rates, worsening outlook for the economy, cost of living crisis, and, potentially, large cuts in public spending, the possible drivers of forced sales are all present.” – Neal Hudson, housing analyst.
Markets revise down interest rate projections following Government U-turn on the 45p tax rate and are now anticipating interest rates of between 5.5% and 5.75% next year rather 6%.
Surge in mortgage arrears and repossessions ‘unavoidable’ but banks will survive these losses due to significant capital buffers, even with a 33% drop in house prices and an unemployment rate of 12% – Capital Economics.
40% of property sales fell through before completion in Q3 - a 9% increase in failures over the past three months. According to Quick Move Now, the main reasons were:
41% Changed mind about the purchase
24% Unable to get a mortgage
18% Due to slow progress
12% Issues with the property survey
September second busiest month for mortgage searches with over 100,000 searches on Twenty7Tec’s platform in one day alone. Fixed rate deals; green mortgages, self-employed, retired and properties valued at over £1m all featured prominently whilst first time buyers queries fell to their lowest level since May 2020.
Cost of living crisis 'pushing vulnerable people to breaking point’. A third of adults who were already vulnerable have seen their mental health worsen in the last 12months during the cost of living crisis, potentially making them less able to make financial decisions – Vulnerability Registration Service.
Foreign travel chaos set to boost UK holiday let demand. On-going concerns about COVID restrictions and a weak pound making foreign holidays more expensive are also factors – Jean Errington, Harpenden Building Society.
Legal & General calls for mortgage industry collaboration as Help to Buy scheme ends on October 31st. The scheme has supported close to 360,000 new build housing transactions since it launched in 2013, according to Government figures.
Lenders urge government to extend Mortgage Guarantee Scheme in a meeting with former Chancellor, Kwasi Kwarteng. The scheme, which sees the Government underwrite any losses incurred on mortgages above 80% of the purchase price of a property, is due to expire at the end of the year.
78% of homeowners still confident about housing market despite the current economic uncertainty. In the poll by estate agency Yopa, 57% of respondents expect house prices to rise over the next year.
Housing market sentiment continues to fall with just 15% of people thinking now is a good time to buy a property, down from 26% a year ago. Affordability (65%), raising a deposit (57%) and having access to a large enough mortgage (48%) were the top concerns – Building Societies Association.
Access FS offers administrative help for brokers freeing up to 70% of a broker’s time, with some claiming to increase the amount of mortgage and protection business they write by three times since the scheme has been in place.
Mortgages are ‘ticking time bomb’ as 3,300 fixes end every day across October and November, leaving borrowers with no choice but to take out a more expensive product – Liberal Democrats.
One in two homeowners reaching end of fixed-term deals within the next three years. 89% are worried about rising interest rates and their mortgage payments increasing – Comparethemarket.
Spike in over 40s taking out 35-year mortgages with 3,039 sales projected this year. This represents a 39% increase compared to 2021 when 2,191 mortgages of this type were sold and a 433% increase from 2020 when only 570 were sold. Although longer terms help reduce repayments, this could have a detrimental effect on their quality of life in retirement warns Quilter.
Newbury Building Society launches Cost-of-Living Support offering financial donations to organisations supporting people in Berkshire, Hampshire, and Oxfordshire. The Society has also launched a hub on their website, where their members can access guidance, support, and links to useful cost of living resources.
Housing is now at its least affordable since records began with research by Leeds Building Society revealing:
In 1980, the average UK house price was around £21,000 and mortgage costs accounted for 11.3% of disposable income. Today, those figures are around £292,000 and 45.1% respectively.
The average home currently costs 9.1 times the average local wage compared to 3.5 in 1997.
Home ownership amongst 25–34-year-olds has collapsed from 65% in 1996 to 27% in 2016, giving them the label of ‘generation rent’.
Average monthly cost of a variable rate mortgage up 13.3% so far this year from £990 to £1,093, after adjusting for inflation – Revolution Brokers.
Average time to sell a home fastest for seven years in 2021 at 52 days. The seven-year average is 63 days – HomeOwners Alliance.
Broker market to jump 12% to £2bn by 2025 despite forecasts of a slowing housing market. The market has grown strongly, recently aided by the pandemic, to make up 5,580 mortgage broker businesses, generating a total market value of £1.78bn, netting each business an average annual revenue of £318,584. – Octane Capital.
Five million households set for average mortgage bill increases of £5,100 by end of 2024 with £1,200 of that reflecting higher expectations of interest rate rises since the ‘mini-budget’ – Resolution Foundation.
91% of brokers believe mainstream mortgage lenders have marginalised self-employed customers by tightening criteria. The same survey revealed that 81% of brokers believe that generally clients’ incomes have become more complex over the last 12 months – United Trust Bank.
Mortgage Broker Tools (MBT) offers mortgage helpdesk giving immediate telephone access to experts able to research the best solutions for difficult cases. The helpdesk complements the firm’s Affordability digital research platform.
Borrowers at risk of losing mortgage offers as delays plague industry with ‘Down valuations’, conveyancing delays and complex property chains among the issues threatening to derail transactions. Lenders also appear to be encouraging cashback options rather than free legals, which often have some of the slowest turnarounds.
Stamp duty payments pass £12bn to hit record – up £3.2bn compared to the same period last year, but against the backdrop of the stamp duty holiday which lasted until September 2021.
Mortgage repayments eat up nearly a quarter of household income rising from 16% to 22% since the start of the year – Octane Capital.
One in four in financial difficulty according to the FCA with 4.2 million people missing bills or loan payments in at least three of the previous six months (up from 3.8 million in 2020) and a further 7.8 million people claiming that bills are a heavy burden (compared to 2.5 million in 2020).
Number of buy-to-let companies passes 300,000 doubling since 2017 and primarily driven by existing landlords moving properties from personal to company names to reap the tax benefits – Hamptons estate agents.
Rising number of adults struggle with rent or mortgage payments up from 26% in Q2 to 30% in Q3, with the option of downsising to reduce costs becoming a consideration for some.
Mortgage Climate Action Group to host green- focused BTL webinar aimed at brokers, as landlords prepare for a phased introduction of the minimum C-rated EPC requirements for new properties in 2025, and existing properties from 2028.
New buyer demand slows "like the Christmas slowdown has come early“ as rising mortgage rates dampen demand. Although the drop has been evident across all parts of the UK, the largest declines have been seen in the South East (-40%) and the West Midlands (-38%) – Zoopla.
FTBs see deposits quadrupling to £81,510 under 6.5% fixes on a typical home if they want to keep their repayments at the same level as when average mortgage rates were 2%.
House price crash could wipe £54k off the average home’s value should the market decline at the same rate as the 2008 financial crisis. The warning comes following market turmoil after the mini budget in September – HBB Solutions.
£3bn worth of new homes sold in 2022 to May based on 7,591 new homes sold at an average price of £384,424. However, the volume of new builds sold is actually down on an annual basis – Unlatch.
UK construction industry to face stronger headwinds in Q4 and into Q1 next year with materials, energy, and fuel price inflation as well as new building regulations and a new Government, impacting confidence – Glenigan.
Nearly two thirds of UK homeowners plan efficiency-driven green upgrades over the decade to cut energy bills citing the rising cost of living. This represents a 15% rise on last year.
74% of homeowners now consider energy efficiency of greater importance due to cost-of- living crisis, with many of them making home improvements in order to help cut their energy bills, according to recent research by Help me Fix.
Buyers paying 15.5% more for energy efficient homes and 79% of estate agents said they are seeing more buyers ask about energy efficiency than they were 12 months ago – Santander.
Tenants shun D-rated EPC homes prompting 54% of landlords to make efficiency improvements over the last 6 months, with 63% bringing forward upgrades due to inflationary pressures – Shawbrook.
New home costs climb by 47% in the last decade even after adjusting for inflation, as new-build properties now command a 37.3% house price premium versus the existing market – Alliance Fund.
London renters suffer from huge demand-supply imbalance with seven people actively looking at each room available – roughly double the rate of almost four people in the rest of the country – and part of a worsening trend.
Foreign homebuyers benefit from weak pound with, for example, the average UK house price equating to US$369,825 at the beginning of the year, now worth $314,932 despite a rise in property prices.
House prices to fall 5% next year which will put house prices back at the same level seen last summer but still 13% above pre-pandemic levels.– Knight Frank Estate Agency.
Annual house price growth continues to slow to 9.9%, returning to single digits for the first time since January. With prices decreasing 0.1% on a monthly basis, the average property price is now £293,835.– Halifax.
Almost half of properties selling below asking price with country homes hit hardest from waning demand suggesting that the so-called ‘race for space’ seen around the pandemic may be over and that customers are making their way back to the cities and suburbs – Hamptons.
Number of homes for sale up 50% since April rising from 20 to 30 per member branch, although still below the pre-pandemic average of 41. The number of house hunters registered on estate agents’ books rose to an average of 83 per branch in September after a summer lull. The figures suggest that “despite rising interest rates and cost of living increases, people are still keen to move” – Propertymark.
House viewings drop by up to 50% since the end of September, although agents expects to see prices flatline rather than crash as they did in 2008.
Rising mortgage costs mean significant house price drop is ‘inevitable’ with falls of around 12% required to make mortgage costs more affordable, rising to 25% if rates stay higher for longer. Elevated mortgage rates and costs will also shut people out of the market, cutting annual transactions from 1.23 million this year to around 925,000 next year and in 2024 – Capital Economics.
Annual house price growth in England and Wales stood at 9.8% in September. Overall the average house price in England and Wales now stands at £373,427, up 0.8% from August.
Lloyds predicts falling house price growth to 0.2% in the first quarter of 2023 and drop further to a decline of 8.2% by Q3, softening to 7.9% by Q4.
Barclays and HSBC expect UK house prices to grow despite ongoing turbulence in the property market.
House prices hit record £371,158 despite market chaos. The 0.9% monthly rise is a softening from the five-year average rise in October of 1.2% and represents an annual rise of 7.8%, compared to 8.7% in September – Rightmove.
55% of estate agents worried about current market, with a quarter fearing the worst in the form of a significant market crash with just 11% stating they still felt confident about the months ahead.
Virginia Water tops most expensive places to live in the UK with average property prices of £1,681,981 rising to £7,179,532 in the most expensive street of Portnall Rise – Zoopla.
UK house prices increase by 8% in September with a price reduction of up to 5% in 2023 most likely as interest rates between 4% and 5% become the norm. Property sales are on track for up to 1.3m this year, down from 1.5m in 2021 – Zoopla.
House prices register first monthly decline since July 2021. They fell 0.9% in October on a monthly basis (and down from 9.5% to 7.2% on an annual basis) leaving the average price of a home in the UK standing at £268,282 – Nationwide.
Government regeneration to boost housing market by £188bn. There are 38 areas marked for significant regeneration, likely to boost average house prices by 3.6%.
Building societies remain open for mortgage business despite current volatility. With around 80% of its mortgage lending from retail savings, they will be able to continue to provide mortgages as they did following the financial crisis in 2007/08 – BSA.
TSB moves stress rates to 8% for resi loans and 7% for FTBs “due to market expectations of future interest rates” following volatility in the sterling funding market after the tax-cutting mini-Budget.
Tightening stress tests will leave BTL ‘dead in the water’ according to some brokers. The Mortgage Works began applying a minimum stress rate of 8.49% on all new buy-to-let applications as an interim measure (up from 5%) and follows similar hikes by lenders including Natwest and TSB.
Rising rates drive buy-to-let investors away from London as the capital returned the weakest returns of any region in England and Wales with an average gross yield of 4.9% – Hamptons.
UK lenders return to market with mortgage rates near 6% following turbulence in the UK government bond market in the wake of September’s mini budget. Barclays, Skipton Building Society, NatWest, Virgin Money and Nationwide are among the lenders to increase rates on new mortgage deals.
Mortgage product choice slowly recovers as rates breach 6%. There were 2,371 residential mortgages on the market as of 5th October - 113 more than the 12-year low of 2,258 deals following the mini budget. However, as lenders return to the market, average two-year fix rates reached 6.07% and five-year fix 5.97% – Moneyfacts.
Two- and five-year prices hit levels 'not seen in over a decade’ as the average rate for a two-, three-, and five-year fix all shot past 6% at the start of October, with the 10-year average price not far behind – Moneyfacts.
Economists expect 100bps rise on November 3rd taking the base from 2.25% to 3.25%, with interest rates projected to hit 5.7% by June next year.
£160.4m of second charge lending in September – the third-highest monthly lending figure of 2022 albeit a 3.63% decrease on August’s record-breaking £166.5m – Loans Warehouse.
Mortgage refinancing could rise 40% next year to £100bn, as customers are hit with higher costs due to rate rises linked to inflation – Deutsche Bank.
Max LTV of 50% is future for BTL purchase market as lenders increase stress test levels and rates continue to rise – SimplyBiz Mortgages / Knowledge Bank.
31% of properties receive offer within one hour of viewing compared to just 7% in 2018. One in eight properties received an offer without a viewing – most common amongst 18-34 year olds – MPowered Mortgages.
Average mortgage rates continue to climb with an average 2-year fixed rate priced at 6.3% and 5-year fixed at 6.19%. As of 10th October, there were 2,905 mortgage products available, that’s over a 1,000 less than there were on the morning of the mini-Budget (23rd September) – Moneyfacts.
Mortgage availability and demand set to decline in Q4 with a negative economic outlook, reduced risk appetite and house price expectations cited as the main reasons. Lenders have reported tightening criteria and a rise in defaults in Q3 and expect this to continue in the final quarter – BoE.
UK five-year mortgage rate dips for first time in two weeks on 13th October from 6.32% (a 14 year high) to 6.28% providing a glimmer of hope that the tide will eventually turn on Britain’s home loan chaos.
Criteria index reveals changing borrower circumstances as ‘maximum age at the end of term’ and ‘lenders accepting late / missed payments’ were popular searches in September – Knowledge Bank.
Mortgage rates ‘likely to be slightly lower’ following Hunt mini Budget U-turns with the CEBR now forecasting a BoE peak rate of 5.1% next year rather than 6%. They predict a rise from the current 2.25% to above 3.5% by the end of this year.
Govt. launches £20m green home finance fund to help lenders develop products that provide homeowners with “upfront and affordable capital” to make their homes greener and cheaper to run.
Bridging market enjoys significant growth providing many buyers with short term loans to cover the cost of a property until they sell their own home or allowing time to find the next right deal on longer term finance – SoMo.
Interest rate rise may not be as large as expected with markets pricing in more than may be required. Following the comments by the Deputy Governor at the BoE, markets reduced the predicted chance of a 1% interest rate rise in November from 25% to 15%.
September housing transactions total 112,370 representing a 32% fall on an annual basis and no change compared to the number seen in August 2022. Industry experts point to the spike in transactions last year at the end of the stamp duty holiday which distort the figures and the fact that September sales were actually well above their pre- pandemic levels.
Equity release loans hit record £1.7bn from a total of 13,452 new plans in the third quarter - Equity Release Council.
UK mortgage rates hover near 14-year high as the average two-year fixed-rate home loan dipped slightly to 6.54% after breaching 6.65% for the first time since August 2008. The average five-year fixed- rate deal also fell to 6.41%, but remains at a level not seen since November 2008 – Moneyfacts.
'Major increase' in tracker take-up as they can be half the price of their fixed rate equivalent (the average two-year tracker product was recently 3.69% compared to a 6.5% average two-year fixed rate) and have low or no ERCs. However, with interest rates expected to rise further they remain a gamble.
Lenders cut down mortgage rates from their 14- year high lead by the likes of Virgin Money and HSBC. The Bank of England is predicted to increase the base rate by 0.75% on November 3, with lenders expected to lower their fixed rates after the announcement while pushing up variable ones.
Fixed rate mortgage rates starting to drop from peak with average 2-year fixes at 6.5% and 5-year options at 6.36% near the end of October, both down 0.15% from their peak earlier in the month.
UK mortgage lending to be lowest in over a decade next year after a surge in rates and cost-of- lending squeeze. Total loans for house purchases may total just £11 billion next year, a fraction of the £63 billion expected for 2022 – Ernst & Young.
Purchase approval number drops by 7,633 to 66,789 (from £17.6bn to £15.9bn in value) in September. Remortgage approvals decreased slightly by 410 to 49,122 (£10.7bn to £10.4bn by value) – BoE.
OnLadder appoints James Bishop as business consultant as it seeks authorisation from the Financial Conduct Authority (FCA) in preparation for it’s launch. The firm plans to unveil a more flexible form of deposit financing to help first-time buyers get on to the property ladder.
Hampshire Trust Bank relaunches bridging business led by Jamie Jolly, who joined from SoMo, where he was managing director.
West One Loans launch first-charge residential mortgage proposition open to first-time buyers, home movers and remortgage customers who have typically been unable to secure finance from mainstream lenders. Marie Grundy will run the new proposition, as managing director of residential mortgages and second charges.
Tandem Bank announces Cardiff expansion to support it’s green home improvement lending and wider first charge mortgage operations as well as a new motor finance division.
Beverley Building Society reinforces board with four new non-executive directors. Stephen Smith, Mark Robinson, Bob Andrews and Barry Meeks are joining to help the society’s strategic plan to drive its lending proposition to significantly higher levels.
Aldermore appoints Ross Dalzell as property division MD to drive the bank’s new strategy and develop products and services for self-employed, first-time buyers and those with less-than-perfect credit histories.
Anna Lewis promoted to commercial director at Castle Trust Bank having joined as director of proposition & strategy in February this year. Lewis has previously held roles at Hampshire Trust Bank, Purely Mortgages and Interbay Commercial.
Gatehouse Bank remains carbon neutral meeting all its certification standards in measuring, calculating, and offsetting organisational carbon emissions for 2021. The challenger bank set out future targets including reducing the emissions of its home finance portfolio by 35% by the year 2030, and capturing and improving the average EPC rating of its home finance portfolio.
Jon Sturgess joins StrideUp as head of intermediary sales following senior sales positions GE Money and Masthaven Bank.
Vida reveals redundancy risk as part of strategic review as the firm aims to beef up its “intermediary experience” and improve access to underwriters to compete more effectively with other specialist mortgage lenders.
Leeds BS appoints Ryatt and Kaur. Jenny Ryatt becomes director of mortgage services with previous employment at Cater Allen Private Bank, Santander and Leeds Permanent Building Society as well as MacMillan Cancer support. Parveen Kaur is the new chief customer officer, holding prior positions at Bank of America, RBS/Natwest and Lloyd’s of London.
Ross Liston exits Sesame Bankhall after 4 years, having been interim CEO since July. Current chairman John Cowan will step in as interim CEO until a permanent CEO is appointed.
Bluestone Mortgages hires Ryan Davies as strategy director to lead the development of new products and other lending opportunities. He joins from Hodge Bank, where he worked for just over seven years in a variety of roles.
Catalyst appoints Ciaran Courtney as intermediary relationship manager having had previous roles at NatWest, Bank of Ireland and Mortgage Intelligence.
LendInvest promotes duo as Sophie Mitchell- Charman becomes commercial director and Leanne Ardron head of bridging in its commercial team.
Atom Bank names Andrew Marshall as CFO replacing Atom co-founder David McCarthy whose departure was first reported back in September.
Danske Bank UK hires Martin Stewart as chairman from the start of next year. He takes over from current chair Gerald Gregory, who worked at the bank for around nine years. Stewart has worked at Danske Bank as a non-executive director since 2020 and is also a non-executive director at Coventry Building Society.
Rightmove names Johan Svanström as CEO taking over from Peter Brooks-Johnson, who will retire after the firm’s full-year results.
MT Finance completes sale of minority stake to an American investment company. In June, MT Finance agreed a forward flow agreement with J.P. Morgan to support the launch of its buy-to-let (BTL) mortgage offering.
Bevan Money gets one step closer to full banking authorisation having completed the pre-application stage of the BoE’s New Bank Start-up Unit. The firm aims to provide mortgages for public sector workers and accept retail deposits. It will distribute its mortgages exclusively through intermediaries.
Shawbrook loan book grows nearly a quarter to £9.8bn an increase of 23% year-on-year adding that it will focus on a “stable and consistent offering to our chosen markets inside a well-established risk appetite”.
Alexander Hall sees revenue jump by over a third in Q3 to £2.8m with a 27% rise in mortgage transaction volumes.
Nottingham Building Society appoints Paul Howley as its first ever chief technology and transformation officer. Howley has held senior roles at RSA, Lloyds Banking Group and RBS.
Legal & General and Lloyds Banking Group lead £35 million investment in Moneyhub with an additional £5m debt facility provided by Shawbrook. The head investors will take minority stakes in the business and use Moneyhub's open data transactional technology to provide personalised services to customers.
Santander sees mortgage lending increase but raises provision for credit impairments. Net mortgage lending increased to £9.8bn in the nine months to September 30th but it has set aside £138m for potential credit impairments.
Lloyds Banking Group puts £668m aside for defaults as mortgage book grows by £1.8bn in the quarter. Post tax profits dropped by over 25% from £5.5bn to £4bn for the nine months to September.
Barclays posts 'strong Q3 performance' amid economic uncertainty revealing a slight increase in profit before tax from £1.9bn to £2bn compared to the last quarter, beating previous forecasts.
NatWest sees 12% growth in mortgage lending to £11bn in the quarter ending September. This is some £3bn more than it did in the same period last year. The bank achieved a pre-tax operating profit of£1.1bn, up from just under £1bn a year ago.
Hodge appoints Tim Thompson as CIO following previous roles at Cumberland Building Society and Hitachi Consumer Finance.
UK challenger Bank North collapses and intends to “sell its loan book” after failing to raise the funds needed for a full banking licence from the BoE.
HSBC cuts mortgage rates for switching customers across two, three and five-year fixed fee as well as existing customers borrowing more.
Virgin Money to up rates and withdraw 95% 2- year fixed rate mortgage. Residential fixed rates and Product Transfer fixed rates have been increased by up to 0.60% and rates across its buy-to- let fixed rate mortgage range which will go up by up to 0.49%.
HSBC to offer free financial health checks to customers and non-customers allowing them to book a call with a financial wellbeing consultant to receive information and support on managing their finances. The company has also been offering free sessions and seminars in the workplace recognising that young professionals were more likely to feel the pinch, with nearly three quarters fearing being unable to cope financially if circumstances changed. Three quarters also said they were concerned they would not be able to handle rising costs this winter and two thirds said the rising cost of living had a direct negative impact on their standard of living.
HSBC raises mortgage rates across five-year fixes for new customers and products for existing customers switching rates as well as on its international residential and buy-to let ranges.
Mortgage Climate Action Group (MCAG) launches new website and HSBC-backed training programme. Established in April 2022, The MCAG helps intermediaries to address green issues involved in mortgage applications and consists of several member firms including Legal & General, Sesame Bankhall Group and SimplyBiz Mortgages. In support of the MCAG’s sustainability goals, HSBC has designed three training modules which explore sustainability, net zero, and how we can transition to a zero-carbon economy.
HSBC outlines new dawn for banks with quantum computing, digital wallets, virtualisation, automation and tokenisation underpinned by web3 – the technology on which the metaverse resides.
Virgin Money launches Green Reward programme for existing residential and buy-to- let mortgage customers. It offer customers £250
cashback when they take additional borrowing, either stand-alone or as part of a Product Transfer, to make green home improvements. It also follows the launch of Virgin Money’s Greener Mortgages product in 2021 which rewards customers who buy new-build homes, which have an Energy Performance Certificate (EPC) or Predicated Energy Assessment (PEA) rating of A or B, with a lower mortgage rate.
Richard Walker, head of intermediary sales at Virgin Money, said:
Virgin brings out exclusive products for purchase and remortgage which come with a £300 cashback. The lender added that it may withdraw these deal at any time without usual notice.
HSBC’s CFO Stevenson exits as profits slip in Q3. Ewen Stevenson will be stepping down from his role at the end of the year and replaced by Georges Elhedery, who has been co-CEO of global banking and markets since 2020. This news comes as the bank reported a £2bn ($2.3bn) annual decline in profit before tax to £2.73bn ($3.1bn) for Q3 2022, and a £1.5bn ($1.7bn) drop in profit after tax to £2.3bn ($2.6bn). As of 30 September, HSBC’s mortgage lending in the UK rose by £7.9bn ($9bn).
Smoove Start digital onboarding platform launches to help estate agents and their clients streamline and speed up administrative tasks involved in a property transaction. The platform collates all key tasks under one roof when onboarding a new buyer or seller, including ID and AML checks, EPCs and title deeds.
Santander launches comprehensive home and mortgage management tool on borrower app. It will allow customers to see their home value estimate and mortgage balance to enable equity growth checks every three months; provide a view of their Energy Performance Certificate (EPC) rating and help arrange home repairs or improvements.
Nationwide integrates with Twenty7Tec resulting in 95% of the client’s data being transferred from the broker’s customer relationship management (CRM) platform allowing advisers to receive a faster decision in principle (DIP) from Nationwide.
75% of UK banks will invest in tech to combat costs with 79% prioritising investment in cloud technologies, 69% are focusing investment in payments, and 66% on APIs, data science, and AI learning – Lloyds Bank Research.
Aklimate launches free retrofit calculator to assist green-focused homeowners. It uses government data to collate a property’s current EPC rating and any measures which can help improve this, combined with information from Habito on how much this could cost.
The conveyancing sector needs a greater commitment to digitalisation with an average maturity score of 43% in a recent survey (rising to over 80% for smaller firms), despite benefits seen with digital signatures to sign Land Registry and mortgage deeds for example – Beth Rudolf, Conveyancing Association.
ChaseBlue fights mortgage fraud with integration of Nivo and OMS providing ID verification, secure communication and document transfer systems into their everyday customer onboarding processes.
Mortgage providers need to go digital or go home claims a report showing that only 42% of house buyers are happy with their service. A lack of digital service was reported by the broker (31%), estate agent (32%) and conveyancer (30%) – Somo.
What firms and customers can expect from the consumer duty and other regulatory reforms.
Sheldon Mills, Executive Director, Consumers and Competition, gave a speech at the Consumer Protection in Financial Services Summit. The highlights were:
Consumer Duty is a significant shift, both for firms and for us at the FCA. It is also an opportunity. The Duty provides a fairer basis for competition and the flexibility of an outcomes-focused, rather than prescriptive, approach. It will provide a boost to growth and innovation.
The Consumer Duty comes at a challenging time for consumers and the wider economy. While the duty is not yet in force, firms should be stepping up now to support customers in these straitened times and ensure customers get good outcomes.
Boards and senior management have a critical role in overseeing firms’ implementation of the Duty. We are committed to working closely with industry during the implementation period and beyond to get this right.
Sheldon Mills concluded by saying ‘Ultimately, when we get this right, we all win: consumers – who will get the right products and services at the price that is fair; firms, who will retain customers and attract new ones; regulators – who will need to step in less often – and most importantly, the wider economy’.
Many FCA regulated firms unprepared for Consumer Duty deadline new research from Moneyhub shows. Only 22% of firms believe that they are currently compliant with the new regulation and 56% of decision makers fear that their business is not prepared, with no projects in place to become compliant ahead of the deadline.
Consumer Duty information for firms has been published by the FCA on a new webpage, including:
October implementation plans: the FCA does not expect firms to have fully scoped all work required to embed the Duty by the October 2022 deadline, but they should have set out how they will do so in time to ensure timely implementation.
Consumer Duty Board champions: the champion’s main role is to support the Chair and CEO in ensuring that the duty is raised in all relevant discussions, and that the Board is challenging the firm’s management on how it is embedding the duty and focusing on consumer outcomes.
Definition of closed products: Closed products are those that are no longer marketed or distributed to retail customers or open to renewal. Where existing customers can continue to make payments under the existing product terms this would still be considered closed, as long as the product or service is not open to new customers.
Consumer Duty and five ways to improve client communication:
Refer to a customer’s lifestyle or circumstances rather than use the word “vulnerability”.
Explain to the customer that providing information will help the firm to give them a better service.
Use short simple messages and clear language.
Support communications with clear online messages about how the firm will use information.
Invest in the training of frontline staff to help them explain why firms need personal information.
The advice comes as firms have until the end of October to produce a plan for implementing the new consumer duty requirements – MorganAsh.
Identify target market
Define good outcomes
Decide how to evidence that 2 is being achieved and 3 avoided
Create the plan – document any gaps between the activity and the evidence
Open Finance could have a role to play in Consumer Duty. “By better understanding your customer, it means you can offer super relevant products and services, and ultimately create stronger relationships and build loyalty” – Moneyhub.
Santander drops judicial review against FOS in relation to a review of mortgage overcharges which aimed to prevent the Ombudsman from accessing standard variable rate details more than 6 years before a complaint was lodged. The lender has agreed to pay both parties legal costs.
HMRC fines 68 estate agents over AML breaches totalling £519,645 for not complying with rules designed to stop criminals from laundering money from illegal activity.
FCA fines Gatehouse Bank £1.58 million for failure to conduct sufficient checks on its customers based in countries with a higher risk of money laundering and terrorist financing as well as politically exposed persons (PEPs). The incidents took place between June 2014 and July 2017 and the regulator reported that the bank has since taken steps to significantly improve its financial crime systems and controls.
Portfolio Supervision Letter for firms providing high-cost lending products has been issued by the FCA. Some of the key harms identified are:
Sludge practices, including not providing clear information about how the product works.
Affordability and relending – insufficiently robust creditworthiness assessments, and refinancing that might result in unsustainable commitments.
Forbearance – a review is underway of how firms treat borrowers in financial difficulty. Interim findings, which firms should already have considered, were published in June, with detailed findings due later in the year.
Failure to comply with the DISP rules on complaint handling, particularly in relation affordability and relending, for example not conducting adequate root cause analysis or identifying systemic issues.
Mark Steward to step down from the FCA as the executive director of enforcement and market oversight after seven years with the regulator.
Regulator proposes new rules to tackle greenwashing which will protect consumers and improve trust in sustainable products. It forms part of the FCA’s ESG Strategy and Business Plan.
FCA launches discussion on competition impacts of Big Tech on financial services as their presence in UK financial services markets has been steadily increasing, with the potential to expand further and change markets quickly.
PRA issues statement on private mortgage insurance schemes with features similar to the Mortgage Guarantee Scheme. The PRA expects firms to assess their compliance including capital requirements and implement changes where necessary by no later than Tuesday 30 April 2024.
Securitisation and trading
Interest rate increases have reduced mortgage affordability and will eventually increase arrears and defaults in securitised pools where borrowers pay floating interest rates or have to refinance at higher fixed rates. Fitch revised the UK residential mortgage backed securities (RMBS) prime and buy-to-let (BTL) asset performance outlooks to deteriorating from stable on 29th September.
Shawbrook completes securitisation of TML buy- to-let portfolio The Lanebrook Mortgage Transaction 2022-1 comprised of 2,452 loans against properties in England, Wales and Scotland. The transaction raised £346m and will provide additional funding to support its growth and further diversify its funding base. It is the fifth securitisation Shawbrook has completed since 2019.