Prudence in the driving seat as buyers under-borrow

Cautious car buyers are no longer “maxing-out” on their borrowing ability, and are increasingly choosing vehicles priced below the amount of the loan for which they qualify.

That’s the finding of Specialist Motor Finance which says it will shortly be reducing by 25% the minimum loan it is prepared to advance for car purchases.

It means that vehicles costing £3,000 will in future be funded, enabling more customers to exercise prudence by building in an extra safety margin to their repayments.

The number of car buyers under-committing to the size of the loans for which they are eligible is growing, according to David Challinor, managing director of Chester-based SMF:

“I think we are witnessing a reluctance among some customers not to take their borrowing to the limit, even when this has already been set at a realistic level,” he said.

“They would rather sacrifice the size of car they buy, or drop down a level of refinement, in order to create a bigger buffer between their income and outgoings.

“We feel that an entirely appropriate response is to provide leeway so that, for example, someone approved for a £4,000 loan does not have to commit to a car of that price.

“If they feel more comfortable with a smaller repayment plan, this should be an option – but the trend for under-borrowing isn’t evident just among budget buyers.

“Even five-figure amounts we approve after demonstrating affordability are often drawn down as a lesser sum after the buyer imposes their own traffic light system for the loan,” added Mr Challinor.

Specialist Motor Finance said it identified the phenomenon after a recent analysis of over £100 million of HP advances it has made through finance brokers and dealers.

Customers, said Mr Challinor, largely comprise those whose credit profiles preclude their acceptance by mainstream lenders, but who are not experiencing chronic financial difficulties.

On the contrary, he says, SMF’s credit scoring system often reveals comfortable earnings in secure employment, and only average levels of existing financial commitment.

Mr Challinor believes the findings point to a rise in the number of financially incisive buyers who are being shunned by some traditional lenders because of historic or minor credit glitches.

Earlier this year, Specialist Motor Finance announced plans to accelerate its growth in the non-standard loan motor markets after receiving a new funding injection of £110 million.

Scrapping section 21 could just exacerbate problems in the BTL sector

Mark Pilling, managing director at Spicerhaart Corporate Sales said: “The government announced last week that it will consult on legislation to abolish Section 21 evictions (no-fault evictions) to prevent private landlords from removing tenants at short notice. Currently, after a fixed-term contract ends landlords can give tenants eight weeks’ notice and evict renters without a reason. And while I understand the reasons for scrapping section 21, I fear it could exacerbate the problem, already being felt in the private rented sector.

“The latest mortgage arrears and possession stats from UK Finance reveal that buy to let arrears are up. This could be down to a number of things, but one factor is likely as a result of the fact many accidental landlords are looking to get out of the sector following recent regulatory changes. If they then need to sell to get out of a difficult situation, they often need to use section 21 in order to get vacant possession to market and sell the property to achieve the best price. If section 21 is scrapped, landlords who are in this situation will have to go through the longer court process to secure vacant possession.

“The truth is, there is always a reason why a landlord ends a tenancy – and in our experience, the reasons for a section 21 are usually due to the fact that the landlord wishes to the sell the property, and also potentially due to the fact that the tenants have missed rent, they are late on rent or they are not treating the house well.

“Where tenants are being evicted through no fault of their own but rather because of their landlords’ circumstances, it must be very upsetting for them, but, if landlords themselves are having financial difficulties, scrapping section 21 could leave them trapped. Their lender then may have no choice but to appoint a receiver or ultimately repossess the property which puts the tenant in an even worse situation.

“In most cases, there is no need for Section 21 to be used, but when a landlord has no choice but to evict, they should be able to do so. The UK has a housing crisis, so the private rented sector is more important than ever and with the tax changes a number of landlords are leaving the sector. By scrapping section 21 you could deter landlords even further, and that is not a good situation to be in.”

Revamp targets knowledge gaps

OpenBanking and auto-decisioning technology provider LendingMetrics has unveiled a new-look website to fill what it says are giant OpenBanking knowledge gaps.

The site – www.lendingmetrics.com – has been re-designed to spell out how OpenBanking can dramatically improve the quality of underwriting and boost standards of compliance.

A series of questions determines the type of business and industry the website’s visitor works for, which leads to the production of a bespoke report in pdf form that flags specific OpenBank benefits that could be tapped.

David Wylie, Director of LendingMetrics, said: “We speak to a lot of finance providers and are aware that for many of them OpenBanking is still, remarkably, relatively unknown. They’ve obviously heard about it, but aren’t clear how it can benefit them. They are stuck with antiquated underwriting well past its sell-by date that comes with possible non-compliance issues, but lack of knowledge holds them back from making any change.”

“Our website, which has been six months in the making, tries to bring the umbrella term ‘OpenBanking’ down to the level of their everyday business. It shows them really that they cannot afford for much longer to avoid using it.”

LendingMetrics has been supplying bank transaction data to credit providers for the past six years and has used this experience to build its auto-decisioning platform ADP and the OpenBanking product OBV (#OBFREE).

Lending Metrics has authorisation from the Financial Conduct Authority as a Registered Account Information Service Provider (AISP).

Global bank uses ‘smart sourcing’ AI to simplify procurement

Globality, Inc. announced today that it has entered into an agreement with HSBC, one of the world’s leading banking and financial services companies, in which HSBC is adopting Globality’s innovative AI-based platform for sourcing and procurement of services.

HSBC is at the forefront of revolutionising sourcing by enabling its business stakeholders to do self-serve procurement utilising Globality’s artificial intelligence, real-time collaboration and intuitive user experience. With Globality’s AI-based platform, HSBC users will be able to scope projects in hours rather than days, and intelligently match their unique requirements to the best suppliers around the world.

Finding the best service provider at the right price for every project is impossible to achieve with legacy systems that are mostly analogue and are not continuously learning, capturing knowledge, or digitally sharing results and feedback. As a result, companies do not get maximum value from third-party suppliers. Nor do they get the unprecedented access to a worldwide network of highly qualified, carefully vetted firms that are members of Globality’s Service Provider Network.

“We are very grateful for the opportunity to work with HSBC’s procurement team to advance their vision of a fully automated procurement process that enables their internal stakeholders to source higher quality, lower cost services. HSBC is a leader in creating a vision for the future of procurement, understanding that the legacy systems of paper-intensive RFPs, and sole source negotiations that do not result in strategic value. Utilising AI technology and Globality’s “smart sourcing” process will ensure that all HSBC service providers, large or small, win projects in a transparent digital platform where decisions are based solely on the merits of quality, results, costs and performance,” said Globality Co-founder, Chairman, and CEO, Joel Hyatt.

Globality’s marketplace provides companies with a highly secure digital way to fully scope projects, engage qualified suppliers, assure pricing and quality competition, effectively evaluate proposals, and make informed sourcing decisions. In addition, using Globality’s Platform significantly accelerates the entire procurement process, enabling far faster speed-to- market.

Cradlepoint survey finds retail industry has priorities misplaced since network uptime is critical to achieving AI and IoT success

A new study from Cradlepoint, the global leader in cloud-delivered LTE and 5G Ready wireless network edge solutions, reveals the retail industry is still facing challenges with network downtime. Despite struggling to provide reliable network connectivity, artificial intelligence (AI) and the Internet of things (IoT) are considered the priority IT focus over the next five years.

The study, carried out in May 2019 at RetailEXPO 2019, found that while most retail professionals (72%) believe Artificial Intelligence (AI) and the Internet of Things (IoT) will be their organisation’s biggest IT challenges over the next five years, the majority of those surveyed (75%) are still experiencing unplanned network downtime and outages impacting business during peak hours.

Despite 10% of retail professionals facing this challenge regularly, more than a quarter (26%) do not have a network redundancy plan in place to minimise business disruption when outages and downtime occurs.

“For retail organisations, unplanned network outages can impact both revenue and reputation significantly, so it is surprising to see many retail organisations have still not adopted the right technology solutions to mitigate this risk,” said Jason Wells, Vice President and General Manager EMEA at Cradlepoint, commenting on the results.

Many retail professionals are looking ahead to AI and IoT, which has the potential to revolutionise the industry, transform the customer experience and drive footfall back into bricks and mortar stores. But for those retailers who have still not implemented reliable connectivity, it will be impossible to take advantage of these emerging technologies set to transform the retail industry in the coming years.

“Fast, reliable network connectivity in the form of wireless Internet is already widely available – both as an emergency failover and as a primary connectivity option. AI and IoT are exciting technologies, but retailers need to prioritise the foundations of these now – and that’s reliable Internet connectivity,” concluded Wells.

Foundation Home Loans completes third securitisation

Foundation Home Loans, the intermediary-only, specialist lender has today completed its third securitisation under the Twin Bridges platform.

Named Twin Bridges 2019-1 – at £329m – it is the largest securitisation of mortgages originated by Foundation Home Loans to date.

Foundation outlined that the securitisation had taken place within a challenging wholesale funding market – year-to-date issuance is at less than 20% than it was during the equivalent period in 2018.

Foundation’s securitisation is the first UK RMBS buy-to-let trade this year and only the fifth mortgage securitisation of any type.

The transaction was massively over-subscribed, attracting the lender’s biggest ever order book of 41 orders totalling £832m, enabling significant price tightening as the trade progressed.

All classes of bonds were over-subscribed at least twice and the trade was done with zero new issue premium over the price at which previous Twin Bridges securitisation bonds trade in the secondary market.

Hans Geberbauer, Chief Executive of Foundation Home Loans, said: “This is a huge strategic success for the business and underlines the strength of our Treasury team at a time when some competitors have been struggling to demonstrate the reliability of their funding approach. The transaction demonstrates the confidence investors have in our proposition. We have recently expanded our warehouse facilities to £750m of funding commitments. The proceeds from this transaction will be directly reinvested in funding our ambitious growth plans for new mortgage originations.”

How National Numeracy Day can help tackle problem debt

According to the National Numeracy Day campaign, around half the UK’s adults have poor numeracy skills. Yet evidence suggests becoming a “numbers person” can help you save money and make money – and it’s never too late to learn. As StepChange Debt Charity is contacted by over 2000 new clients a day, that implies that around 1000 StepChange clients every day could benefit from numeracy skills to help them as they seek to manage their debt problems.

To mark National Numeracy Day, today [15 May] StepChange Debt Charity is for the second year a Numeracy Day Champion. The charity is hosting a “Budgeting Special” Facebook Live event from 12:30pm onwards [15 May], to which questions can be submitted either in advance, via the charity’s Facebook page, or in real time. The charity’s website landing page is also being given over for the day on 15 May to promoting numeracy, and encouraging visitors and clients to take The National Numeracy Challenge.

National Numeracy Day was launched in 2018, with the inaugural campaign seeing over 100 UK organisations drive 25,000 people to start their journey towards improved numeracy – and StepChange wants to help the campaign beat that number this year. Evidence suggests improved numeracy leads to greater financial capability, and those with lower numeracy levels may struggle to select the cheapest loans, choose the most appropriate savings products, and make an effective budget.

StepChange’s Chair, John Griffith-Jones, is also vice-chair of the National Numeracy, the charity behind National Numeracy Day, and blogs today on how the two roles fit together, and why he feels passionately about the links between numeracy and being comfortable with financial matters. He writes:

“If we could magically bestow numerical skill upon each and every person in the UK, as wonderful as that may be, it would not single-handedly tackle the issue of problem debt. But it certainly would help. On a basic level, numeracy is key in creating a budget. Budget creation is often the first step towards getting one’s finances under control. For individuals at risk of falling into problem debt, it would potentially allow for them to identify issues earlier, and thus avoid an unmanageable situation.”

With 18.5 million working age adults with low or poor numeracy, StepChange is also joining other organisations in calling on Britain’s employers to help their employees to improve their number confidence. Low levels of numeracy skills are estimated to cost the UK economy over £20 billion a year.

Phil Andrew, CEO of StepChange, said:

“This National Numeracy Day, StepChange is proud once again to be a National Numeracy Day Champion. As an employer, I recognise that excellent numeracy is a key skill that we can help to encourage. On a day to day basis, our staff use their numeracy skills to help others with their financial problems, so we are no strangers to the potential becoming a ‘numbers person’ can unlock.

“Improving the nation’s numeracy will not of itself resolve the country’s growing debt issues, but encouraging self-improvement on numeracy can only help with budgeting, and empowering more people to take advantage of cheaper goods and services by being able to compare their true cost effectively.”

Freedom Finance appoints new Chief Customer Officer to drive digital transformation

Fintech platform Freedom Finance appoints Jake Ranson as Chief Customer Officer (CCO) to further drive its digital transformation. Jake joins from Equifax where he held the position of Chief Marketing Officer for Europe.

Jake will be responsible for furthering Freedom Finance’s customer strategy, helping potential borrowers to understand and unlock the power of their personal data to achieve the best possible outcomes for their individual circumstances. He brings significant expertise from the UK’s consumer finance market, particularly in creating digital products that make financial decisions engaging and straightforward.

Freedom Finance provides customers with clarity, rather than endless personal finance options. Coupling relevant data with innovative technology, its unique lending platform provides customers with the most suitable range of options and rates by combining multiple data sources with bureau soft-searches and services like Open Banking.

At Equifax, Jake worked on the implementation of the world’s first live Open Banking journey with HSBC – a service that Freedom Finance integrated within its online applications in February.

Jake, who brings extensive knowledge in commercial strategy, digital innovation, and end-to-end product lifecycle management, will also lead the development and capabilities of Freedom Finance’s app, which removes complexity from applications to help every customer make the best decision from the products available to them. Jake’s appointment follows Freedom Finance’s rapid growth in customer numbers year-on-year.

Brian Brodie, Chief Executive Officer at Freedom Finance said: “Jake’s appointment comes at a time where Freedom Finance is investing in technology and people to help carve-out exactly what borrowers want in the digital market. Freedom Finance recognises how, coupled with secure and sophisticated technology, financial information has the potential to improve borrowers’ financial lives.

“With years of experience in one of the largest data businesses in the world, I am delighted to have Jake join us at Freedom Finance. I have no doubt that his experience will further strengthen our leadership team and how the business meets customers’ requirements in a highly digitised world.”

Jake Ranson, newly appointed Chief Customer Officer at Freedom Finance stated: “Personal finance can be complicated and unnecessarily daunting for some. Many consumers still feel alienated and confused by the industry and end up with the wrong products as a result. Freedom’s ability to mesh digital technologies, analytics and human support provides unrivalled levels of advocacy on the journey to making a financial decision. Freedom Finance’s ethos of combining digital and human interactions has earned tremendous reviews from its customers and is something I feel is well worth championing in today’s market.

“Freedom Finance has unrivalled capabilities and huge growth potential, which drew me to the business. I look forward to working within a talented team dedicated to delivering experiences and outcomes which inspire customers to return”.

Credit myths continue to cause confusion among UK consumers, finds TotallyMoney 2019 Financial Awareness Survey

In their annual Financial Awareness Survey 2019, credit experts TotallyMoney asked a nationally representative sample of 2,000 UK adults a series of questions to test their personal finance knowledge.

  • A majority (58%) are unaware the electoral register affects credit rating
  • Almost a third (30%) in­correctly believe Credit Reference Agencies (CRAs) approve or deny applications
  • Just one in seven (14%) know the credit blacklist is a myth
  • Roughly one in three­ (31%) wrongly thought student loans impact credit rating

Credit blacklisting, criminal records and unpaid student loans. These are just a few of the credit myths that continue to confuse consumers, reveals credit experts TotallyMoney.

The survey revealed some unnerving findings. For example, only 14% of respondents understood there’s no credit blacklist. And just over a quarter realised their address doesn’t affect their credit rating.

But the most surprising (and worrying) result is the connection between credit score and the electoral register.

A huge 58% of adults surveyed didn’t know that being on the electoral register affected your credit rating. This could mean over half of UK adults eligible for credit products are missing out on an easy boost to their credit score.

Alastair Douglas, CEO of TotallyMoney, warns myths breed credit danger and missed opportunities. Douglas said: “The world of credit is already, at times, a complex and confusing place.

“Myths about blacklists, unpaid student loans, and some addresses being more favourable than others, adds to the confusion. And can even be damaging.

“Believing the fictions might influence someone’s decision whether to press ahead and get the support of a credit card or loan, or not. And sometimes the financial support of credit products helps with life-changing decisions.

“It’s terrible to think some people put off certain financial decisions because they believe they’re blacklisted. Or that someone looking to improve their credit score doesn’t know about the benefits of getting on the electoral register.

“If people avoid applying for credit they’re entitled to and make compromises because of misinformation, it can have a real impact on their financial decisions. And our findings show there’s still a lot of confusion among consumers.

“One way to clear up some of this confusion is to get your free credit report. TotallyMoney’s unique credit report analysis shows you what really goes into your credit score and report, and gives you the facts to better understand your financial position.”

Based on TotallyMoney’s Annual Financial Awareness Survey for 2019, here are the most common credit fictions, some theories on where the myths come from, and the OnePoll survey data.

Sorting credit fact from credit fiction

Myth 1. There’s a credit blacklist

Why people believe it: Being ‘blacklisted’ is a commonly used term in the credit industry. It refers to those who make multiple unsuccessful applications, which damages their credit rating and causes more rejections. People have come to believe this is an actual list they’re added to if they have poor credit history.

The facts: There is no blacklist used by credit companies or Credit Reference Agencies. But every credit company has their own criteria, so there are circumstances when a lender won’t accept a credit application.

The findings: Our survey found that the majority of people thought the credit blacklist was a document that existed. Only a handful of respondents (14%) were aware this isn’t the case.

Myth 2. Credit Reference Agencies decide who gets credit

Why people believe it: CRAs hold all the information needed to determine someone’s credit score and create their credit report. This can lead people to believe that because the CRA holds the information, they tell the lender whether to accept or reject a credit application.

The facts: A CRA is like a huge data library. They pull information from lenders and public bodies to create an individual’s credit report, but the information they hold is for lender reference only. It’s the lender (a.k.a the credit company) that makes the final decision.

The findings: Nearly one in three respondents (31%) believe it’s CRAs that decide whether someone’s application for credit is accepted or declined.

Myth 3. Where you live impacts credit rating

Why people believe it: When applying for credit you need to give your address. The mistaken belief is that you’re asked for your address because where you live counts towards your credit score.

The facts: Addresses don’t influence your credit rating. Lenders ask for this information to help them find an individual’s credit file and confirm their identity. The only time addresses can cause a problem with credit applications is if the applicant has recently moved house and not updated the CRAs (this makes it harder for lenders to find the right details). Some lenders also hesitate if they see multiple house moves in a short space of time.

The findings: More than a quarter of those surveyed (26%) understood that your address and the area you live in don’t impact your credit rating.

Myth 4. Two scores become one when you’re a couple

Why people believe it: Many couples choose to apply for a joint mortgage, make big purchases together and open joint bank accounts. It’s easy to assume that, as a couple, you have one credit score for both of you.

The facts: Everyone’s credit score is individual to them — even if you’ve been with your partner for a long time. While you can be financially linked to your partner and some lenders will look at both of your scores when considering your application, you still have your own individual credit scores.

The findings: More than 1 in 2 (52%) were unaware that your partner’s poor credit history could affect your individual borrowing ability, although when you’re a couple, your partner’s credit score is not linked to your own. Around 1 in 5 (18%) thought that your marital status directly impacted your credit score, whilst a few more respondents (37%) knew that any savings — solo or joint — had no influence on credit rating.

Myth 5. A monthly salary improves credit score

Why people believe it: Most credit companies ask consumers to make monthly repayments. Some people wrongly believe that because you have the security of a monthly income, it proves to lender they’re in a strong position to pay their credit bills.

The facts: Getting paid a monthly income doesn’t prove to lenders how well you’re able to manage your money or credit. For that reason, when you get paid, or even how much you’re paid, won’t positively or negatively influence your credit score. The best way to prove you can handle credit is making repayments in full and on time.

The findings: Just under a third of people (30%) realised a regular, monthly salary has no impact on credit ratings. It doesn’t put you in a stronger or weaker position compared to someone who’s paid weekly, fortnightly or sporadically (like a self-employed person or freelancer).

Myth 6. Criminal convictions impact credit score

Why people believe it: This could tie in with the myths about earnings and address history impacting credit scores. Going to prison can affect both of these, so consumers mistakenly believe criminal records negatively impact someone’s eligibility for credit.

The facts: Having a criminal record or being fined doesn’t show up in your credit history, because it says nothing about your ability to make repayments. So, this won’t impact your score. What will affect your score is a County Court Judgement (CCJ) or filing for bankruptcy. A CCJ remains on your credit report for up to six years and declaring bankruptcy prohibits lenders giving your credit for 12 months.

The findings: Only one fifth of respondents (20%) were aware that even if you have a criminal record, it won’t affect your credit score.

Myth 7. Unpaid student loans damage credit rating

Why people believe it: Part of being accepted for credit is based on how you repay loans and borrowed money. So, it’s fair to assume that because a student loan is a loan, how it’s paid back is taken into account when working out credit scores.

The facts: Students loans aren’t visible on your credit report, so don’t impact your credit score. This is because they’re paid back through salary deductions. However, any credit cards or additional loans you take out as a student — so anything other than your tuition fee or maintenance loan — will show on your credit report.

The findings: Of those surveyed, just over a quarter (28%) knew that a student loan can’t affect your credit rating.

Paradigm announce 2018-19 lender and provider award winners

Paradigm Mortgage Services and Paradigm Protect, the mortgage services and protection propositions, have today announced the winners of its annual Lender and Provider Awards, which is now in its fifth year.

The awards were voted for by Paradigm’s directly authorised member firms each month and the results collated over the course of the 2018/19 financial year decide the winners.

The overall winners for 2018-19 are as follows:

  • Best Overall Lender – Winner: NatWest.
  • Best Residential Lender – Winner: Santander.
  • Best Buy-to-let Lender – Winner: Kent Reliance.
  • Best Specialist Lender – Winner: Kent Reliance.
  • Best Equity Release Lender – Winner: Hodge Lifetime.
  • Best Life Protection Provider – Winner: Legal & General.
  • Best General Insurance Provider – Winner: Uinsure.
  • Best Critical Illness Provider – Winner: LV=.
  • Best Income Protection Provider – Winner: The Exeter.
  • Best Group Risk Provider – UNUM.

Paradigm personnel also voted for their Strategic Partners of the Year awards, a special category for businesses which are judged to have excelled in their support of the Paradigm business and members. These Strategic Partner awards are split between both the mortgage and protection side of the business. The winners are:

  • Strategic Lender Partner of the Year – Precise Mortgages.
  • Strategic Provider Partner of the Year – AIG Life.

Each month, Paradigm’s members are encouraged to vote for their top three lenders and providers in each category, enabling Paradigm to provide an ongoing snapshot of advisers’ views throughout the course of the year. This annual process ensures those lenders and providers who consistently deliver service excellence are appropriately recognised.

Bob Hunt, Chief Executive of Paradigm Mortgage Services/Paradigm Protect, commented: “Firstly, we’d like to offer our very warmest congratulations from everyone at Paradigm to all our winners in this year’s Awards. Given that these results are collated over the course of the last year, those who have produced consistent excellence are rewarded for their efforts and it gives a very real view of which lenders and providers are held in the highest regard.

“Working with quality lenders and providers has always been incredibly important to both Paradigm Mortgage Services and Paradigm Protect and we continue to add businesses to our panels to ensure our members have access to the broadest range of products and services available in the market.

“Competition is undoubtedly heating up across many sectors and those that have taken the plaudits this year will know they cannot afford to rest on their laurels given the quality of the propositions that are now available to advisers. This is all good news for our member firms and I’m sure they’ll continue to have their say on the top performers over the course of the next 12 months.”

Brad Fordham, Managing Director at Santander for Intermediaries, said: “I am delighted that Paradigm advisers have voted Santander as their number one residential lender. Intermediaries are at the heart of what Santander do and my team work very hard to develop and innovate our offering so that we can provide you with a proposition that meets customer’s lending requirements. Thank you for this award and here’s to an equally successful 2019.”

Adrian Moloney, Sales Director at Kent Reliance for Intermediaries, added: “On behalf of everyone at Kent Reliance for Intermediaries, I’m delighted to receive the awards for Best Buy-to-let Lender and Best Specialist Lender. To receive these awards from a key partner is one thing but to know they have been voted for by its own members makes this even more satisfying. I think this is testimony to the support and proposition that can only be effectively delivered if a lender and broker work together to match clients’ expectations, and we certainly have that with Paradigm.”