Households facing “double-whammy” of high inflation and looming tax rises

The latest UK consumer price inflation (CPI) figures, published today by the Office for National Statistics, show that CPI rose to 5.4% in December, up from 5.1% in November, its fastest pace for 30 years.

Joanna Elson CBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “Household budgets are facing a double-whammy of high inflation and looming taxes rises this year.

“This is creating a perfect storm for household budgets – our concern is that this will tip many more households into financial difficulty in the coming months.

“It has never been more important to make sure people receive the free debt advice that can turn their situation around.  I would urge anyone who is worried about their finances to seek free, independent debt advice from a charity-run service like National Debtline as soon as possible.”

Buy-now, pay-later spending up by £1bn over Christmas 2021

The amount of Christmas shopping put on buy-now, pay-later rose by £1billion in 2021.

As banks, retailers and others continue to jump on the increasing popularity of the BNPL payment method, Britons racked up £3.3bn in Christmas debts, with two in five (42%) yet to repay them in full.

A study conducted by smart money platform, Credit Karma, highlights a growing debt bubble amongst buy-now, pay-later customers, as one in 10 (11%) users admit that they’ve missed repayments, and a similar number expect to fall behind.

Failing to keep up with payments could pose a risk to consumers’ credit scores. According to the study, nearly half of those struggling to manage buy-now, pay-later debt have already seen their credit rating drop, which can make securing personal loans, mortgages, credit cards and even mobile phone contacts less accessible or more expensive in the future.

Despite the budgeting issues they can create, the payment plans are considered easier to access than credit cards and personal loans. This can be seen in the number of successful applications made: with one in three consumers (31%) using the service over Christmas alone.

As the buy-now, pay-later industry awaits further government regulation, the free credit report provider is urging caution amongst consumers.

Ziad El Baba, General Manager at Credit Karma, said: “Spreading out payments can be helpful in certain circumstances, however it becomes problematic when consumers borrow more than they’re able to comfortably pay back. Plus, most buy now, pay later companies don’t report to the credit bureaus, which leaves many buy-now, pay-later customers at a disadvantage. This is especially true for responsible borrowers who won’t likely see their credit scores improve as a result of making regular, on time repayments, as they would with other forms of borrowing.”

Hodge sees 173% increase in holiday let mortgage applications in 2021

Hodge has seen a 173% increase in the number of holiday let mortgage applications in 2021 compared with 2020, according to new figures.

The new data also found the average holiday let property mortgaged by Hodge has also increased year on year by £50,000 and now sits at £404,000.

Coastal locations are still the most popular areas to buy a holiday let, with Devon and Cornwall postcodes still topping Hodge’s list for the most applications.

When it comes to the most popular time to apply for a holiday let mortgage, June 2021 saw a 19% increase in the number of applications compared to any other month since Hodge launched its holiday let product.

Emma Graham, business development director at Hodge, explained: “We’ve seen a very tumultuous couple of years since we first launched our holiday let mortgage at the end of 2019. As Brits went into lockdown, families across the country looked for other ways to holiday and the staycation reached peak popularity, giving our holiday let mortgage proposition a boost.

“It’s all about flexible criteria at Hodge, the fact we can lend to non-owner-occupiers and don’t impose any minimum income requirements for this sort of lending has made our proposition compelling.”

Emma added: “What this new data shows is that the increase in interest in UK holidays is also having a knock-on effect on the demand for holiday homes, as well as their values with a year-on-year increase in price, and a year-on-year increase in applications to us at Hodge.

“Whatever the next year brings travel-wise, we see no sign of the interest in buying your own place by the sea or in the country waning, as there are still many people who are worried about travelling abroad, or who have seen the beauty in holidaying at home.”

Hodge customers can borrow up to £1.5 million and use their holiday let investment property for up to 90 days a year. The lender also has its unique Hodge Early Repayment Promise, which means if the customer sells their home and pays off their mortgage completely, any Early Repayment Charges are waived.

Consumer finance new business grew by 33% in November 2021

New figures released today by the Finance & Leasing Association (FLA) show that consumer finance new business grew by 33% in November 2021 compared with the same month in 2020. In the eleven months to November 2021, new business was 14% higher than in the same period in 2020.

The credit card and personal loan sectors together reported new business up by 34% in November compared with the same month in 2020, and 15% growth in the eleven months to November 2021. The retail store and online credit sector reported new business up by 2% in November compared with the same month in 2020, and 7% growth in the eleven months to November 2021.

Commenting on the figures, Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “In the run up to Christmas the consumer finance market reported growth across the board, in part reflecting low new business levels a year earlier as the UK entered another lockdown to deal with rising Covid-19 cases. Consumer demand also remained robust with the retail store and online credit sector reporting its strongest November on record.

“Consumer finance new business provided by FLA members in 2021 as a whole is likely to be around 7% lower than its pre-pandemic peak and the rate of recovery is expected to slow in the near term as household disposable incomes are squeezed by higher inflation, taxes and interest rates.”

Pandemic decline in housebuilder liquidations

Market analysis by real estate debt advisory specialists, Sirius Property Finance, has found that despite a reduction in the number of housebuilders filling for liquidation during the pandemic, the market share of new homes built by SMEs has fallen. 

The initial analysis by Sirius Property Finance looked at the level of liquidations across the construction industry, more specifically the sub-sector of residential and non-residential building construction. The data shows that across Britain, there has been a steady increase in this figure since 2016 where both compulsory and voluntary liquidations are concerned. 

Between 2016 and 2017, the total number of liquidations climbed by 8%. Between 2017 and 2018 there was a further increase of 19%. This was followed by a 22% annual increase from 2018 to 2019. 

However, in 2020 when the initial Covid outbreak hit the nation, the number of housebuilders filling for liquidation saw a decline of -38%. 

Managing Director of Sirius Property Finance, Nicholas Christofi, commented: “There are a number of influences that could have driven this decline in liquidation levels. Despite the problems posed by the initial outbreak of COVID-19 and the restrictions imposed across the construction sector, we’ve since enjoyed a property market boom that will have helped boost profit margins considerably and this will have helped many better negotiate an otherwise tough period. 

At the same time, we’ve seen a range of government initiatives implemented, such as the furlough scheme, in order to help businesses overcome the financial difficulties of the past two years. This will have certainly helped many companies who may otherwise have failed to survive.” 

However, despite this positive movement, the number of SMEs operating within the sector is thought to have declined. Previous research by Sirius Property Finance found that since the late 80s, the estimated share of homes built by SMEs across England has fallen from around 77,500 a year to just 19,500 – a 28% reduction with them accounting for just 12% of all homes built. 

The latest look at SME housebuilder market share estimates that this has since fallen further in 2020 to just 14,789 new homes per year – just 10% of the total market. A trend that Sirius Property Finance believes may continue as we move forward. 

Nicholas Christofi, continued: “Many SME housebuilders won’t have had the cash reserves that their larger sector counterparts would have had and this means they simply haven’t been able to weather the problems posed by the pandemic in the same manner. When you also consider the widespread supply issues caused by the pandemic and the protracted length of the planning process itself, it’s been far harder for small to medium enterprises to dust themselves off and get building again. 

However, new and emerging methods of finance are available that better suit SME builders and these options are helping them to overcome the financial strain of the last two years.  

Conventionally, property development was based on straightforward bank debt. Yet now we see far more innovative ways of funding a building project and specialist lenders that are competing with high street banks head on. These resources are now more competitive, with better terms and, often, much faster to deploy and so there is a likelihood that this will enable SME developers to fight back fiercely over the coming year.”

Just Mortgages restructures to accommodate 100% expansion

Leading broker firm, Just Mortgages has restructured into East and West divisions in order to efficiently manage its growth, with changes taking effect this week. The firm has grown at least 20% every year over the past seven years and the changes enable Just Mortgages to provide additional support to its employed brokers.

The two divisions will have their own managing directors. The managing directors will oversee and run the growth of their divisions, while liaising closely with the Spicerhaart estate agency chains.  The new roles will help Just Mortgages to continue its exponential growth.

This growth has come as it expanded the services that it provides, beyond mortgages and protection to also encompass equity release and wealth management. The wealth management service will look beyond a client’s mortgage and protection needs to provide pension, investment and savings advice as well as a wills service.

The goal now is to double the number of employed mortgage and protection advisers from 125 to 250.  At the same time Just Mortgages aims to increase its wealth business ten-fold over the next year to £30,000,000 of business. Just Wealth was only launched in January 2021 and is already on target to have 25 advisers by this February.

The two managing directors have been promoted from within Just Mortgages, providing further opportunities for promotion throughout the organisation. Tommy Taylor will become the managing director for the eastern division and Duncan Jones will manage the western division. Both Tommy and Duncan were previously Just Mortgages’ financial services directors.  This opens up vacancies for others in the organisation to take on these roles. The two new financial services directors will then report into the managing directors.

Under the financial services director for each division will eventually be 25 divisional sales directors (DSD), this number has grown from just 11 at the start of 2021. Each DSD manages, coaches and develops a team of mortgage and protection advisers, helping each adviser to reach their full potential while providing a consistently high level of client service.

John Phillips, national operations director of Just Mortgages and Spicerhaart says, “The team has pulled together in both good times and bad to achieve a truly phenomenal level of growth over the past few years. We have continually grown both the number of clients and the level and frequency of service we provide each client.  We have done this at the same time as expanding the services that we provide them.  Our aim is to grow by providing a truly holistic financial advice service, looking after every part of a client’s financial needs.”

Duncan Jones says, “This is a huge opportunity for the growth of Just Mortgages and everyone within it. The new structure will enable Tommy and I to really focus on the growth of our divisions and the company as a whole.  As we have grown, we have not only seen an increase in the number of clients, but also a huge rise in the number of mortgage advisers who want to join Just Mortgages. This new structure enables us to take on more advisers while also providing them with the high level of training, mentoring and career progression that Just Mortgages is renowned for.”

Tommy Taylor says, “This is more than just a restructure, it positions Just Mortgages, and all who work within it, for the next stage of growth; a growth that will take us from being a mortgage and protection business to a true financial services business.  At the same time we can offer progression opportunities for mortgage advisers at all levels, from those just starting in the industry, to those who want to progress their careers into a different type of advice, or even become self-employed.”

In addition to the employed division, Just Mortgages had grown its division of self-employed advisers, which launched in 2016, to more than 400 advisers by the end of 2021.

LazyPay Forays into Card segment: launches LazyCard to empower India’s underserved with access to credit

LazyPay, India’s preferred Buy Now Pay Later solution by PayU Finance, today announced its partnership with SBM Bank India to launch LazyCard, a prepaid payment instrument backed by a credit line, foraying into the card segment. The card aims at empowering financially underserved Indians with easy access to credit. Powered by Visa and SBM Bank India, LazyCard is built with a strong rewards structure, creating value for customers in every transaction by offering bigger, better cash back rewards and offers like never before. Digitally linked to the LazyPay app, the card uses robust technology to ensure security and a hassle-free experience in managing payments.

Available to the 62 million pre-approved users of LazyPay, LazyCard will empower customers with a credit limit of up to INR 5 lakh.  Consumers may avail the card at zero joining fee and zero annual fee. It also offers users multiple transactional benefits and reward-earning potential such as welcome rewards, retention rewards and Visa Platinum Rewards in the form of cashbacks. The credit line provided by LazyCard is also boosted by the rewards received on every transaction. Users have an opportunity to earn 1% to 5% cash back on every transaction, making it one of the most rewarding cards available in the market.

Commenting on the launch of LazyCard, Prashanth Ranganathan, CEO, PayU Finance, said, “As per various industry reports, today only 3 in every 100 Indians owns a credit card, creating a massive credit gap in our economy. We are excited to launch ‘LazyCard’, to empower and elevate the underserved, by giving them means to carry out financial transactions without worrying about their bank account balance. Backed by our proprietary credit underwriting capabilities and data science muscle, the card boasts the largest pre-approval base of 62 million customers, helping more people qualify, particularly in the pandemic’s strenuous economy. We aim to reach corners of the population and give a card in the hands of all underserved Indians.”

LazyCard’s ‘Booster’ feature is useful for thin-file borrowers to rebuild their credit score or establish their credit history. This feature enables users to get access to the card by setting up a fixed deposit with RBI-regulated SBM Bank India in a fully digitized two-minute app flow. ‘Booster’ feature allows users to get three benefits (1) Money security via fixed deposit, with higher interest rates than savings for boosting wealth (2) Cashbacks & offers on LazyCard that boosts the credit line (3) Improve credit score over time to strengthen their eligibility for future credit needs. As the user continues to transact using the card and build his creditworthiness, LazyPay will start unlocking the credit line. The user is then free to withdraw the deposit and continue enjoying access to enhanced credit and rewards on the card.

The card, which is an extension of the services offered by India’s most popular deferred payments options LazyPay, comes in a physical and a virtual avatar and offers customers the same level of convenience, speed, and flexibility in their buying experiences across all touch points, online and offline. Cardholders will have access to the credit line across the LazyPay credit universe, which includes products like LazyPlus (UPI), LazyPay (BNPL) deferred payment and LazyPay app.

Commenting on the partnership, Neeraj Sinha, Head – Retail & Consumer Banking, SBM Bank India, said, “There is a need to solve for the credit needs using Smartbanking solutions that are available, accessible, and affordable. SBM Bank India is endeavouring, as a part of its comprehensive SmartBanking solution set, in partnership with LazyPay, to introduce the Visa powered LazyCard. Further this Card will smoothen the entire loan processing capability at LazyPay’s end thus helping to bring them towards better financial inclusion. We are elated to partner with LazyPay towards this prepaid card.”

Speaking on the launch of the card, Sujai Raina, Head – Business Development, India, Visa, said, “Fintechs like PayU Finance have, in recent years, been at the forefront of driving innovation and financial inclusion of new consumer segments in India. We are excited to launch the LazyCard program to make credit more accessible to existing LazyPay customers as well as new-to-credit users. This Visa-powered LazyCard is issued instantly, available in physical and virtual form, and offers users a readily available credit line, rewards and Visa Platinum benefits, enabling seamless and secure payments across millions of merchants that accept Visa cards.”

Currently, the card is available to select LazyPay customers, and will be broadly made available soon. All customers interested in early access are invited to sign up for the LazyCard waitlist today. Applying for a LazyCard is an easy process. To get this instant credit prepaid card, users need to download the LazyPay app and visit the LazyCard tab where they can input their KYC details for review. The entire onboarding process is fully digital and paperless and is completed within minutes, with instant issuance and activation. The physical card would then get delivered within stipulated days .

OMS announces inaugural third-party system integration with Submissions Brain

One Mortgage System (OMS), the seamless single-input enquiry to completion processing platform for mortgage intermediaries, has become the first third-party system to integrate with Submissions Brain, the multi-lender application and submission gateway from Mortgage Brain.

This integration between these leading tech-based firms in the intermediary space will now enable OMS users to submit applications to an array of lenders including Nationwide Building Society, Virgin Money, Coventry Building Society, Accord, TSB and Platform – without the need to rekey data.

The Submissions Brain tool connects advisers with the back office systems of participating lenders. A full audit trail supports advisers in meeting their compliance requirements and client documents can be uploaded directly from Submissions Brain to help track the progress of individual cases.

OMS is the only end-to-end mortgage system which covers product areas such as residential, buy-to-let, second charge, equity release, bridging, commercial plus general insurance and protection. In addition OMS provides users with best in class for product sourcing, protection sourcing and criteria searching.

Neal Jannels, Managing Director of One Mortgage System (OMS), commented: “This integration will help save our users up to 20 minutes per case as it will allow them to pre-populate data directly through Submissions Brain onto the lender’s platform, therefore allowing them to submit a decision in principle or full mortgage application through a single login.

“The OMS platform is all about making our users life easier, maximising their time and making processes more efficient and effective. Becoming the first third-party system to integrate with Submissions Brain fills us with great pride and demonstrates just how far we have come as a business in a relatively short time. And we will continue implementing important integrations to transform the mortgage journey for advisers and their clients.”

Neil Wyatt, sales & marketing director at Mortgage Brain: added: It’s been great to work with a fellow tech provider like OMS who is as passionate about streamlining the mortgage process and supporting advisers as we are. As businesses, we both have a burning desire for brokers to be able to choose the tech they want to work with and for that tech to be in a position where it can successfully communicate with each other.

“Integrations such as these are vital in helping the advice process to become as seamless as possible from application right through to completion and deliver tangible benefits in a cost-effective manner for both the adviser and the lender. We look forward to establishing a long and successful partnership.”

Impact Specialist Finance exclusive products now on MortgageBrain

Impact Specialist Finance has announced that all their exclusive and semi-exclusive products can now be sourced on the intermediary product sourcing systems, MortgageBrain and Sourcing Brain.

Impact’s packaging business is an award-winning, market-leading mortgage distributor and packager built on 30 years of experience and a reputation for quality and service. They support brokers with all types of cases including Complex Prime Residential, Buy to Let, Bridging Loans, Commercial Finance, Development Finance, Equity Release and Later Life Lending.

Dale Jannels, Managing Director at Impact Specialist Finance, commented: “As a market leading packager and distributor, specialist lenders regularly give us access to exclusive and semi-exclusive products that are not available to brokers directly. Until now, these could not be accessed on MortgageBrain, which meant that brokers could not view, select, recommend or produce KFIs on our products, if they used the system.

“We were keen to remove this barrier to enable more brokers to recommend and choose our products for their customers.”

Neil Wyatt, Sales & Marketing Director at Mortgage Brain, commented: “In a market that is becoming increasingly complex it is critical that we work closely with specialist distributors to ensure that our users and their customers have the widest possible options available to view, source and recommend.

“I have known and worked with the team at Impact for over 20 years and so am delighted to now be working with them and able to display their products on our sourcing tools.”

House prices scale new heights, but inflation may well halt the ascent

Average house prices reached another record high of £276,091 in December. During 2021, the average price rose £24,500 – the biggest gain since 2003. Prices rose 3.5% in the three months to December – the highest quarterly growth since 2006.

The Halifax House Price index for December is out today: december-2021-halifax-house-price-index.pdf

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “House prices scaled new heights by the end of  2021, with record prices and the kind of rapid rises we haven’t seen in almost two decades. But inflation could bring this high-speed ascent to a shuddering halt.

“2021 created an environment that was ideal for rampant price rises. The stamp duty holiday, rock bottom mortgage rates, lockdown savings, the race for space, and the fact there were so many more buyers than sellers, all fed into a surging market.

“We would always expect growth to slow after this kind of boom, because people have brought forward house price purchases. So many people are now in a bigger home and have spent their lockdown savings, that demand will naturally fall back. We can therefore expect house price growth to slow as we go into 2022.

“How much it slows will depend to a great extent on inflation. Higher inflation can deal a double whammy to house prices. It costs more to make ends meet, so people have less cash to save for a property move, and struggle to afford a bigger mortgage. At the same time, higher inflation is likely to persuade the Bank of England to raise rates, pushing up mortgage costs too.

“We expect inflation to rise to as much as 6% in the spring, but an awful lot will depend on how much the energy price cap is hiked in April, and whether any support from the government is forthcoming. More support could keep a lid on inflation, while runaway gas prices, accompanied by increases in the cost of everything from petrol to fresh food and furniture could push inflation even higher.

“The market is currently pricing in a rate rise in February to 0.5%, with more rises through the year. Right now, mortgage rates have lifted from record lows, but remain incredibly cheap. With more rate rises on the cards, we could see mortgages become less affordable, which will put the brakes on the housing market. The kinds of rates being predicted aren’t likely to be enough to precipitate market falls. At the same time, the imbalance of more buyers than sellers should help keep a floor under prices. But the runaway house price growth of 2021 could very quickly become a thing of the past.

“Of course, making firm predictions in a time of Covid is always fraught with uncertainty. New variants of concern, more lockdowns or closures of specific sectors could bring inflation down without the need for a series of rate rises. Alternatively, they could fuel more shortages, and push prices sky high. The economy could surprise either on the upside or the downside.

“This makes it incredibly difficult to base your financial position on what you feel will happen to inflation, interest rates and house prices. Instead, it comes back to making the right decision for your own financial position, so you’re prepared for whatever 2022 holds in store.”