Property sales rise: but it’s an interval, not the end of the show

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Property sales (seasonally adjusted) in June were 15% lower than a year earlier, at 85,870, but 6% higher than May. Part of the monthly rise was down to the fact there were more working days in June than May. Aside from when the market was effectively shut in June 2020, it’s the slowest June in a decade.

HMRC has released details of property transactions in June: Monthly property transactions completed in the UK with value of £40,000 or above – GOV.UK (www.gov.uk)

Sarah Coles, head of personal finance, Hargreaves Lansdown said: “This is an interval, not the end of the show. Property sales may have picked up slightly in June, but we can expect the decline to kick off again in a couple of months. Higher transactions in June came courtesy of slightly more working days and the easing of mortgage rates back when these sales were agreed. We may well see more sales again in July, but after that, today’s higher mortgage rates are likely to hit hard. We can’t applaud the end of the sales slump, because the second act is about to start.

“Sales were up 6% between May and June. However, it’s worth bearing in mind this was from a very low base, and when you compare it to a year earlier, they were actually down 15%. Aside from the early pandemic, it’s the slowest June in a decade, so this is a small bump in an overall decline.

“Given that it takes around three months from agreeing a sale to completing, these figures reflect buyer sentiment in March. Back then, mortgage rates had eased off significantly from the mini-budget spike, and according to Moneyfacts, the average 2-year fix was around 5.3% and the average 5-year fix around 5%. Rates continued to fall slowly through April – so July’s figures may look reasonably healthy too. However, in the months since, they’ve risen gradually and then rapidly, pushing 2-year fixed rates above 6.8% and 5-year rates over 6.3%. This has taken a massive toll on demand, which Zoopla figures show has fallen a fifth in the past two months. It means that when we get sales figures for the Autumn, we can expect some significant drops.

“It’s not all bad news though. In the last few days, Moneyfacts figures show that average mortgage rates have started falling, and some major lenders have started to cut their rates. We’re not heading back to an era of super-low rates just yet, but it’s a welcome easing for the market. It remains to be seen whether this is enough to halt the slide, or whether the decline in property sales is set for an encore.”

We have to take encouragement – Comment on the HMRC property transactions for June

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“With so many conflicting reports around the state of the housing market and mortgages in particular, we have to take encouragement from the non-seasonally adjusted figures from HMRC today.  Although lower than in 2022 the uplift from the number of transactions in May shows a level of confidence returning.  Most of these transactions have been in the pipleline for over three months, a time when the hikes in interest rates coupled with the highest inflation for years could have caused a serious lack of confidence.  It appears that despite everything the need to move has outweighed these negatives.

“With the news that the American Federal Bank increased interest rates this week, it is understandable that borrowers will be anticipating the Bank of England to do likewise.  However, with the recent drops in swap rates, it is up to lenders and brokers to educate their clients that perhaps a base rate rise next week may not necessarily mean an immediate rise in mortgage rates.  There are plenty of opportunities, especially in the remortgage market, so a proactive approach is vital to keep things moving in the coming months.”

Adam Oldfield, chief revenue officer at Phoebus Software

LiveMore adds lifetime mortgages to complete its product line up

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LiveMore, the lender for people aged 50-90+, has expanded its product offering to include equity release mortgages in order to offer customers the widest range of options possible.

Like all mortgage products, lifetime mortgages may be a suitable solution under certain circumstances for some people but it is not the answer for everyone. This becomes ever more important under the new consumer duty rules, where brokers and lenders must ensure they provide the best outcome for clients so all options should be considered.

This new addition completes LiveMore’s product suite making it the lender with the broadest product offering in the later life lending space. The lifetime mortgage joins LiveMore’s current range of retirement interest-only, interest-only, as well as capital and interest mortgages.

Since inception, LiveMore has aimed to become the home of holistic home loan finance, finding the right product for an individual’s needs. With consumer duty about to arrive, consideration of all potentially suitable products alongside equity release should be a focus point in the later life sector.

It is anticipated that the new lifetime mortgage will only be used by those for whom LiveMore’s other products are not suitable.

Rates start at 7.5% and customers can borrow up to 10% of the value of their home at age 55 and up to 43% for those aged 90+. There are no product or valuation fees, and the product comes with a no negative equity guarantee and is portable if customers wish to move.

Loan sizes range from £10k up to £1million and the property must have a minimum valuation of £100k. To bring the final repayment down there is the option to make voluntary repayments of up to 10% a year.

LiveMore has one of the best early repayment charge (ERC) structures in the lifetime market with fixed ERCs ending after ten years. And, of course, there are no ERCs if the customer passes away or moves into long-term care. For joint borrowers, if one moves into long-term care or passes away the other has a three-year window to redeem the mortgage or sell the property ERC free.

Leon Diamond, CEO and founder of LiveMore, commented: “We’ve been working extremely hard on our lifetime mortgage product, which complements our existing proposition and will only be advised upon if our other options are not suitable for someone.

“Consumer duty is all about finding the right result based on each client’s circumstances. By offering repayment, interest-only and lifetime mortgages, we can truly say that LiveMore is able to find the most suitable product every time.”

Diamond is keen to stress the importance that while equity release is the right solution for some, it shouldn’t be the only option: “Equity release is great in some cases, but not all. That’s why we’re proud that offering the broadest product range in the later life market means, for example, that we can help those over 55 who would benefit from equity release, but also recommend a retirement interest-only mortgage if they would be better off making interest payments.”

Financial Lives survey highlights importance of the FCA’s Consumer Duty

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The Financial Conduct Authority (FCA) has found 7.4 million people unsuccessfully attempted to contact one or more of their financial services providers in the 12 months before May 2022, with the most vulnerable in society most likely to struggle with this.

The figure comes from the FCA’s latest Financial Lives survey with over 19,000 respondents.

Less than half of UK adults, or 21.9 million people, had confidence in the UK financial services industry and just 36% agreed that most financial firms are honest and transparent in the way they treat them. Although a more positive picture emerged when people were asked to rate their own provider rather than the sector in general.

The regulator’s findings come only days away from the introduction of the Consumer Duty. The Duty will require firms to act to deliver good outcomes for consumers and, in turn, help to improve trust and confidence in the financial services sector.

Under the Duty, firms will have to:

  • Provide helpful and responsive customer service – for example, it should be as easy to complain about or switch and cancel products or services as it was to buy them.
  • Equip their customers to make good decisions through communications people can understand, provided at the right time.
  • Provide products and services that meet consumers’ needs and work as expected.
  • Explain and justify their pricing decisions. This includes being able to demonstrate that rates offer fair value.

Sheldon Mills, Executive Director, Consumers and Competition said: “Times like this show why it’s important people get the support they need as more people are likely turning to their financial services providers for help.

“Our Consumer Duty will guide our ongoing work to improve the way firms provide customer support – getting through to your provider is the starting point for receiving help, so we will be working with them to improve in this area.”

FCA action since the start of the cost-of-living squeeze has already led to an increase in the amount of engagement lenders are having with their customers. Following conversations with firms and new guidance set by the FCA, lenders supported over 2 million mortgage customers to manage their finances in the past year, including through budgeting tools, access to debt advice, and tailored mortgage forbearance.

While there have been positive steps taken, there is still work to do – 4.9 million people who used firm communications to help them make a decision in the 12 months before May 2022 found it did not help at all.

The FCA’s survey also found that an increasing number of people are choosing to use digital banking, payments and other online services, with almost nine in ten adults (88% or 42.9 million) banking online or using a mobile app in 2022, up from 77% in 2017.

While there is an increasing number of people regularly using digital services, the FCA recognises that many people are still heavy users of cash (6% or 3.1 million) and reliant on face-to-face services. Through the Financial Services and Markets Act, the FCA will take on powers on access to cash and will expect firms to ensure that they meet all their customers’ needs.

Comment: FCA Financial Lives survey

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“Clearly, much of the UK still distrusts  lenders and other financial services firms – this isn’t surprising when millions have found it almost impossible to contact their providers for support.

“UK households are in desperate need of added protections in the cost of living crisis so the incoming Consumer Duty is hugely welcome news. There remains a stark lack of transparency across the sector, with many FS firms persisting with misleading information about charges, hidden fees and repayment terms, borrowers are in a hugely challenging position to make educated decisions about their finances.

“Our research also shows that over half of people believe that lenders don’t care about their financial wellbeing whilst 70% say lenders are purely out to make a profit. More need to be done to improve transparency and support for the millions of people across the UK who are reliant on credit to survive.”

Neil Kadagathur, Co-Founder and CEO of Creditspring

StepChange responds to FCA Financial Lives Survey

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The new Financial Lives survey from the FCA has found that more than 7m people unsuccessfully attempted to contact one or more of their financial services providers in the 12 months before May 2022, while less than half of UK adults said they had confidence in the UK financial services industry in general.

The findings echo StepChange’s own research which has found that half of GB adults (53%) say that they would be reluctant to seek help with financial difficulty from a bank or credit firm.

With the FCA’s previous research finding number of people struggling to meet bills and credit repayments has risen by 3.1m since May 2022 to over 10m people, StepChange is urging firms to use the upcoming Consumer Duty as an opportunity to be more pro-active in getting better help to people in financial difficulty as quickly as possible.

Richard Lane, StepChange Director of External Affairs, said: “The FCA’s survey reinforces why firms should see the forthcoming Consumer Duty as opportunity to improve how their customers are treated. While firms have stepped up to help millions of people navigate the cost of living crisis, we know that people showing signs of financial difficulty need help as early as possible to prevent them from becoming trapped in a spiral of harmful, unaffordable borrowing. So we urge firms to embrace the Consumer Duty and to develop appropriate support for their customers.”

MotoNovo Finance Strengthens Senior Leadership Team with Three Senior Appointments

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MotoNovo Finance (MNF) has announced the expansion of its Senior Leadership Team with three senior external appointments – Leanne Christmas who joins as Conduct and Business Risk Director; Alice Sweet who becomes Product and Proposition Director; and James Gearey who has been appointed as Interim Commercial and Performance Director.

The new additions will report to Managing Director, Richard Jones, as he continues to reshape the business he joined in February. They will each play a crucial role in developing and delivering MNF’s new strategy and leading the business into the future. The three roles have all been newly created and will complement Richard’s existing Senior Leadership Team.

  • Leanne Christmas who has been appointed as Conduct and Business Risk Director Motor, joins the business from BMW Financial Services and Alphabet, where she has spent seven years as Chief Compliance Officer, and more recently, she was responsible for the Controlling and Treasury function. Leanne trained at Deloitte as a chartered accountant and previously held several global risk and governance roles within the Barclays Bank group.
  • Alice Sweet’s appointment as Product and Proposition Director sees her join MotoNovo following a career that has seen her hold senior roles in Lloyds Banking Group, where she worked across Retail and Business Banking, and most recently, the Royal London Group, where she was responsible for shaping the business strategy and building the proposition roadmap for Royal London’s Consumer Division. Most recently, she led Royal London’s UK Life Insurance business.
  • James Gearey joins as Interim Commercial and Performance Director. His initial focus will be on developing the business strategy. James brings an extensive track record that includes senior leadership roles at Siemens Financial Services and Aviva across insurance, commercial and asset-based finance. He joins MotoNovo from Covea Insurance, where he was Managing Director for Personal Lines and Protection.

Commenting on the appointments, Richard said: “I am delighted to welcome three new members to my Executive team, who bring considerable capability and expertise to help drive our business forward.

“These are exciting times for MotoNovo Finance as we embrace an era of unprecedented change in the motor industry and I am confident we now have the right team in place to help our business embrace the challenges and opportunities that present themselves.”

Value of pawnbroker loans rockets 41% in a year to £223 million as households scramble for extra cash

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The value of loans taken out from pawnbrokers has rocketed 41% in just a year, from £158m in 2021 to £223m in 2022 says Mazars, the international audit, tax, and advisory firm.

The figures also show that arrears on pawnbroker loans – high-interest loans secured with a personal item held as a guarantee – are also rising sharply, up 34% in 2022 to £57 million from £42 million in 2021.

This means that many are at risk at forfeiting their personal items if they fall behind on payments. Interest rates on pawnbroker loans can typically reach 120-160% APR*.

In pawnbroking loans, individuals give up their valuables in exchange for money with the option to reacquire the asset once the debt, plus interest, is paid. However, if the loan is not repaid in full on time, then the pawnbroker becomes the legal owner of the asset.

Paul Rouse, Partner at Mazars, says the cost-of-living crisis has taken its toll, stretching people’s finances to the limit, and pushing an increasing number of people who can’t secure credit to scramble for money from high-interest options.

Spiralling inflation over the past year made it harder for people to stay on top of their bills, forcing some to take out short-term loans to cover unexpectedly high costs.

Adds Paul Rouse: “The cost-of-living crisis is taking a big bite out of household finances. An increasing amount of people are finding that they need quick access to small loans to keep up with rising costs and are being forced to turn to pawnbrokers.”

“This upward trend should be concerning – in the short term it is a sign that too many people are struggling. It’s even more worrying in the longer term, with no end currently in sight to the period of elevated interest rates.”

The FCA has tightened its restrictions on high-cost consumer credit, such as doorstep lending. This has led to a surge in growth among pawnbrokers as many with weaker credit histories sought short-term loans.

* Financial Conduct Authority – Occasional Paper No 59: Sitting on a gold mine: Getting what’s owed to pawnbroking customers (fca.org.uk)

** Goldman Sachs as reported in The Times Tuesday 30th May

BNPL: Research shows 3/4 UK consumers want regulation

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As reports emerge that HM Treasury could be delaying plans to regulate the sector, research from NewDay* found that consumers are concerned about the lack of regulation in BNPL options:

  • Only 16% of UK adults deem BNPL “trustworthy”
  • Almost half (45%) worry that unregulated BNPL could get them into debt
  • Over three quarters (78%) say they would prefer a regulated BNPL option over an unregulated one even if that meant a longer application process

Ian Corfield, Chief Commercial Officer at NewDay, says: “It is concerning to hear that plans to regulate BNPL could be delayed even further. Our research clearly shows that consumers would welcome regulation to increase trust with BNPL products, expanding its appeal rather than stifling it. There is also consumer misunderstanding of BNPL as a form of credit, and its potential impact on credit scores. At a time when consumers are facing increasing costs, consumer protections need to be strengthened not delayed. There are regulated equivalents to BNPL offering instalment finance out there already, proving that it can be done successfully without limiting options for consumers. Instead of delaying regulation, the roll-out should be brought forward, benefitting both consumers and the industry as a whole.”

* Opinium Research surveyed a nationally representative sample of 2,000 UK adults between 27th January – 31st January 2023.

Money Wellness calls for a ‘uniform approach’ to school uniform grants

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Money Wellness is calling for the government to review school uniform grants, after 93% of parents said they were unaware there was any help available.

A Money Wellness survey found 97% of families – already struggling with debt – were worried about being able to afford school uniform this September. The same number (97%) said now they know they might be able to get a grant, it’s highly likely they’ll apply.

The majority (57%) said they spend more than £150 on school uniforms each year and over half (52%) said they had to make cutbacks to cover the cost.

Other ways families find the money to pay for school uniform include:

  • 11% rely on credit
  • 11% save throughout the year
  • 11% use second-hand clothes passed onto them
  • 4% get help from families
  • and just 3% have successfully applied for a grant

School uniform grants are handed out to families by their local councils. They are worth up to £150 per child but how much you get, and if you qualify, depends on where you live and your council’s criteria.

One council could offer nothing, another £30 and a third £150 because the government hasn’t set fixed rules.

Ian Somerset, Chief Executive of Money Wellness, said: “School uniforms are an additional cost that low-income families struggle to meet.

“We’re speaking to lots of families who are having to cut back on basics like food or electricity just to ensure their children go to school in the right uniform. They shouldn’t be having to choose between a blazer and putting food on the table or pushing themselves further into debt. And children shouldn’t be going to school worried about feeling isolated or singled-out because they have mismatched or incorrect uniform.

“Reform is desperately needed because school uniform grants are a total lottery – inadequate at best and non-existent at worst. One family in one area could receive £150 worth of help, while another family a few miles away might get nothing.

“It’s time the government recognised that this isn’t acceptable and it’s letting down the poorest families in society at a time when they need help the most. We’re calling for a meaningful change to the system so that low-income families can be confident about what they’ll receive, regardless of where they live.”

School uniforms are commonplace in the UK. Almost every secondary school (98%) and the majority (79%) of primary schools require children to wear some form of uniform.