Consumer finance new business up by 11% in May

New figures released today by the Finance & Leasing Association (FLA) show that consumer finance new business in May grew by 11%, compared with the same month last year.

Credit card and personal loan new business together grew by 11% in May, while retail store and online credit new business increased by 8%. Second charge mortgage new business fell 1% by value, but was up 2% by volume over the same period.

Geraldine Kilkelly, Head of Research and Chief Economist, said: “Growth in consumer finance new business in May was in line with wider trends in the economy. Retail sales were boosted by events such as the Royal Wedding and hot weather, while the continued strength of the labour market and low interest rate environment meant consumer confidence remained relatively stable in the first half of 2018.”

Fleet Mortgages announce revamp of entire product range

Fleet Mortgages, the buy-to-let and specialist lender, has today (4th July 2018) announced a revamp of its entire product range with new options across its three core sectors – standard, limited company and HMO.

In total, Fleet now offers 13 products and has reduced rates on 12 of those. These cuts have been made possible because of the unique funding methods it employs; Fleet is partnered with a number of asset managers to deliver its funding.

The standard range includes rate reductions of up to 45 basis points with products offered including:
· Two-year fixed rate (75% LTV) reduced by 10 basis points to 2.89% – the product has a maximum loan of £200k.
· Five-year fixed rate (75% LTV) reduced by 6 basis points to 3.69%.
· Five-year fixed, pay-rate (75% LTV) also reduced by 10 basis points to 3.89% – this product has an interest coverage ratio (ICR) of 135% at the initial rate.
· Lifetime LIBOR tracker (75% LTV) reduced by 45 basis points to 3.4%.
· A standard two-year fix (75% LTV) which remains at 3.39%.

Fleet’s limited company range has also seen rate reductions of between 10 to 45 basis points and the lender is now not offering 65% LTV products. The rest of the new range includes:
· Two-year fixed rate (75% LTV) cut by 20 basis points to 3.39%.
· Five-year fixed rate (75% LTV) cut by 10 basis points to 3.79%.
· Five year fixed, pay rate (75% LTV) cut by 10 basis points to 3.89% – this product has an ICR of 125% at the initial rate.
· Lifetime LIBOR tracker (75% LTV) reduced by 45 basis points to 3.4%.

Finally, Fleet has also reduced prices across its HMO product range by between 10 and 35 basis points, including:

· Two-year fixed rate (65% LTV) cut by 10 basis points to 3.49%.
· Two-year fixed rate (75% LTV) cut by 10 basis points to 3.59%.
· Five-year fixed rate (75% LTV) cut by 20 basis points to 3.89%.
· Lifetime LIBOR tracker (75% LTV) reduced by 35 basis points to 3.6% – this product has an ICR of 125% at 5%.

Fees on the standard range remain at 1%; fees on the limited company range are 1.25%, except for the pay rate product which is 1.5%; and fees on the HMO range remain at 1.5%. All two-year fix end dates have been extended to 30th September 2020, with the five-year fixes at 30th September 2023.

For all standard and limited company products – except those offered at pay rate – Fleet Mortgages operates an ICR of 125% at 5%, regardless of tax rate. The lender also operates with a number of specific commitments to advisers and their portfolio landlord clients, which are:

· No additional or extra paperwork to complete – a standard application form and Property Asset & Liability Statement is all that is required.
· Landlords can have unlimited properties in their background portfolio, with no requirement to key in details of all individual properties in the portfolio.
· No delays for the client due to additional processing and no stress testing on the background portfolio.
· A focus on quicker processing times meaning no increases in costs to client and advisers always have access to experienced portfolio underwriters.

Fleet Mortgages is a specialist buy-to-let lender with products distributed via intermediaries only. It is specifically focused on providing mortgages to portfolio and professional landlords and recently announced that two-thirds of its purchase mortgage applications were now via limited companies.

Fleet Mortgages, the buy-to-let and specialist lender, has today (4th July 2018) announced a revamp of its entire product range with new options across its three core sectors – standard, limited company and HMO.

In total, Fleet now offers 13 products and has reduced rates on 12 of those. These cuts have been made possible because of the unique funding methods it employs; Fleet is partnered with a number of asset managers to deliver its funding.

The standard range includes rate reductions of up to 45 basis points with products offered including:

· Two-year fixed rate (75% LTV) reduced by 10 basis points to 2.89% – the product has a maximum loan of £200k.
· Five-year fixed rate (75% LTV) reduced by 6 basis points to 3.69%.
· Five-year fixed, pay-rate (75% LTV) also reduced by 10 basis points to 3.89% – this product has an interest coverage ratio (ICR) of 135% at the initial rate.
· Lifetime LIBOR tracker (75% LTV) reduced by 45 basis points to 3.4%.
· A standard two-year fix (75% LTV) which remains at 3.39%.

Fleet’s limited company range has also seen rate reductions of between 10 to 45 basis points and the lender is now not offering 65% LTV products. The rest of the new range includes:

· Two-year fixed rate (75% LTV) cut by 20 basis points to 3.39%.
· Five-year fixed rate (75% LTV) cut by 10 basis points to 3.79%.
· Five year fixed, pay rate (75% LTV) cut by 10 basis points to 3.89% – this product has an ICR of 125% at the initial rate.
· Lifetime LIBOR tracker (75% LTV) reduced by 45 basis points to 3.4%.

Finally, Fleet has also reduced prices across its HMO product range by between 10 and 35 basis points, including:

· Two-year fixed rate (65% LTV) cut by 10 basis points to 3.49%.
· Two-year fixed rate (75% LTV) cut by 10 basis points to 3.59%.
· Five-year fixed rate (75% LTV) cut by 20 basis points to 3.89%.
· Lifetime LIBOR tracker (75% LTV) reduced by 35 basis points to 3.6% – this product has an ICR of 125% at 5%.

Fees on the standard range remain at 1%; fees on the limited company range are 1.25%, except for the pay rate product which is 1.5%; and fees on the HMO range remain at 1.5%. All two-year fix end dates have been extended to 30th September 2020, with the five-year fixes at 30th September 2023.

For all standard and limited company products – except those offered at pay rate – Fleet Mortgages operates an ICR of 125% at 5%, regardless of tax rate. The lender also operates with a number of specific commitments to advisers and their portfolio landlord clients, which are:

· No additional or extra paperwork to complete – a standard application form and Property Asset & Liability Statement is all that is required.
· Landlords can have unlimited properties in their background portfolio, with no requirement to key in details of all individual properties in the portfolio.
· No delays for the client due to additional processing and no stress testing on the background portfolio.
· A focus on quicker processing times meaning no increases in costs to client and advisers always have access to experienced portfolio underwriters.

Fleet Mortgages is a specialist buy-to-let lender with products distributed via intermediaries only. It is specifically focused on providing mortgages to portfolio and professional landlords and recently announced that two-thirds of its purchase mortgage applications were now via limited companies.

Bob Young, Chief Executive Officer of Fleet Mortgages, commented: “Fleet Mortgages is very pleased to be launching these new products today across our three core areas which see significant rate reductions. We believe this highlights our commitment to the buy-to-let sector and our ongoing appetite to lend to quality borrowers in this space.

“We continue to operate at the very highest standards of responsible lending practices and our ongoing strapline of ‘only lending to those that can afford it’ remains as true today as it was when we set up the business nearly four years ago.

“Our average stressed ICR for mortgage applications last month was 151% while our debt-service-cover-ratio – a simple measure that works out how many times rent covers mortgage payments at the actual pay rate – was 219% for all mortgage applications received; indeed this figure has been in excess of 200% for the last number of years. Interestingly, the latest UK Finance figures for May this year, show that 5% of all buy-to-let mortgages had an ICR of less than 120%, significantly below Fleet’s levels.

“Advisers and their clients can therefore rest assured that they will be dealing with a focused and highly experienced lender that works to the highest standards and is committed to writing quality business that is competitively priced and affordable to the borrower. We continue to grow our operation with a range of in-the-field and telephone BDMS available to advisers, plus access to dedicated and experienced underwriters. We are also soon to roll out a series of ‘breakfast meetings’ to help brokers understand limited company lending, the pitfalls and the opportunities.

“Coupled with this advisory support and our 24-hour turnaround on all post received, plus five days on average for our application/valuation service, which is certainly above the norm, we believe Fleet is leading the way in this sector and we will continue to put advisers at the heart of our business and deliver what they require.”
The Fleet Mortgages’ product guide is available to view by visiting the website at: https://www.fleetmortgages.co.uk/products/

Bob Young, Chief Executive Officer of Fleet Mortgages, commented:

“Fleet Mortgages is very pleased to be launching these new products today across our three core areas which see significant rate reductions. We believe this highlights our commitment to the buy-to-let sector and our ongoing appetite to lend to quality borrowers in this space.

“We continue to operate at the very highest standards of responsible lending practices and our ongoing strapline of ‘only lending to those that can afford it’ remains as true today as it was when we set up the business nearly four years ago.

“Our average stressed ICR for mortgage applications last month was 151% while our debt-service-cover-ratio – a simple measure that works out how many times rent covers mortgage payments at the actual pay rate – was 219% for all mortgage applications received; indeed this figure has been in excess of 200% for the last number of years. Interestingly, the latest UK Finance figures for May this year, show that 5% of all buy-to-let mortgages had an ICR of less than 120%, significantly below Fleet’s levels.

“Advisers and their clients can therefore rest assured that they will be dealing with a focused and highly experienced lender that works to the highest standards and is committed to writing quality business that is competitively priced and affordable to the borrower. We continue to grow our operation with a range of in-the-field and telephone BDMS available to advisers, plus access to dedicated and experienced underwriters. We are also soon to roll out a series of ‘breakfast meetings’ to help brokers understand limited company lending, the pitfalls and the opportunities.

“Coupled with this advisory support and our 24-hour turnaround on all post received, plus five days on average for our application/valuation service, which is certainly above the norm, we believe Fleet is leading the way in this sector and we will continue to put advisers at the heart of our business and deliver what they require.”

Brits cite money saving product recommendations as the biggest incentive to use Open Banking

Six months into Open Banking, online research from Equifax, the consumer and business insights expert, reveals that two fifths (40%) of Brits willing to share their bank transaction data with a new lender would do so if it provided them with product recommendations which save them money.

Other motivations to share transaction data through Open Banking include the ability to easily compare products from different financial institutions (36%), being offered tailored incentives for switching to a new provider (34%), and a streamlined process when applying for mortgages (28%) and loans* (25%).

Jake Ranson, Banking and Financial Institution expert and CMO at Equifax Ltd, said: “Since the implementation of Open Banking at the start of the year we’ve seen widespread product developments among banks and fintechs alike, as market players recognise the scope of opportunities available. New products and solutions such as HSBC’s credit application offering have come to market, showcasing the real life consumer benefits the initiative can deliver.

“Open Banking is moving the sector forward to the digital world and it’s an exciting time. As the rate of product launches accelerates awareness will continue to grow, providing the uplift in consumer engagement needed for the project to be truly transformational.”

Hampden & Co added to Paradigm lender panel

Paradigm Mortgage Services, the mortgage services proposition, has today (2nd July 2018) added private bank, Hampden & Co, to its lender panel.

From today, selected Paradigm member firms will be able to introduce any suitable high net worth clients to Hampden & Co, to access its range of bespoke lending products covering both residential and buy-to-let mortgages.

The bank currently lends to individuals, families and commercial entities such as limited companies, partnerships and trusts.

Hampden & Co lends on UK property to those resident in this country and those who have a current account with the bank; loans available include:

· Residential mortgages – both repayment and interest-only.
· Buy-to-let mortgages.
· Holiday let mortgages – for those with property rental businesses.
· Property loans – lending to fund the purchase of one property, where the borrowing is secured on a separate property.
· Family (Guarantor) mortgages.

The bank does not lend based on income multiples or via computer-based models; it looks at each individual, understands that wealthy individuals can have income from multiple sources and maintains a flexible approach when assessing affordability.

As well as salaried income, Hampden & Co also takes into account: pension income, property rental, investment and dividend income, director fees and income from Lloyd’s insurance activities.

One of the bank’s key requirements is that its banking staff meet with all prospective clients so that a full affordability assessment can be undertaken, and in order that suitable advice can be given where applicable.

John Coffield, Head of Paradigm Mortgage Services, commented: “Hampden & Co offers a bespoke lending service to clients and this new arrangement allows selected Paradigm member firms to introduce suitable clients to the bank in order to access its product range. As in the main market, there is an increasing complexity to many borrowers’ income sources – especially the case for wealthy individuals – and it’s important they work with lenders and banks that understand the need for a bespoke lending service.

“We understand that advisers who have access to these types of clients might be willing and able to introduce them to Hampden & Co, in order that they can benefit from the services on offer, especially if they are looking for larger loans and want a tailor-made offering. Therefore we have partnered with Hampden & Co to deliver a unique and bespoke offering to selected members.”

Graeme Hartop, Chief Executive of Hampden & Co, said: “We are delighted to be working with Paradigm and their mortgage intermediaries. Hampden & Co provides lending solutions to wealthy clients with more complex financial arrangements. All borrowing requests are dealt with on an individual basis and decisions made by our in-house experts.”

StepChange Debt Charity comment on latest Bank of England lending statistics

Today’s data from the Bank of England shows that consumer credit growth rates continued to slow in May, but remains rapid relative to 2009-12. Although net lending fell slightly on the month, at £1.4 billion, it was in line with the average amount borrowed monthly over the past year. The decrease was driven by a fall in the amount of other loans and advances (which includes personal loans, overdrafts and car finance), with credit card lending rates remaining broadly the same.

Peter Tutton, Head of Policy at StepChange Debt Charity said: “It’s encouraging to see consumer credit growth stabilise, and we must not become complacent with tackling and preventing problem debt affecting the most vulnerable households, as the FCA observed they faced higher overdraft charges in their retail banking review earlier this week.

“Whilst this month has seen a decrease in unsecured borrowing excluding credit cards, we must not lose sight of the impact of sustained pressure on already stretched household budgets in coping with the rising daily cost of living. We estimate 1.4 million people are using high cost credit for everyday bills, which highlights the urgency for developing and supporting affordable credit alternatives which can help vulnerable households manage periods of financial instability without plunging them into persistent problem debt.”

Shanghai bank approves 9 million credit card applications with FICO

Shanghai Pudong Development Bank (SPDB) Credit Card Center, a credit card lending pioneer in China, has increased its customer base using originations powered by technology from analytics software firm FICO. SPDB Credit Card Center’s total number of credit card applications using originations driven by a big data AI analytics strategy has exceeded 9 million, since January 2017. During this incredible growth, SPDB has maintained a controllable risk level while increasing its origination rate more than two-fold to 88 percent of applications.

For its achievements, SPDB has won the 2017 FICO Decisions Award for Customer Onboarding and Management.

FICO’s origination and big data AI analytics solution was introduced with the aim of overcoming the challenges brought by the rapid development of SPDB’s credit card business. One of the key limitations holding back speedy originations was the limited credit data available on customers.

“Using custom scorecards and models from FICO built using Big Data AI analytics, SPDB Credit Card Centre has managed to significantly improve its risk assessment of consumers with either thin files or no files at the People’s Bank of China credit bureau,” said Sandy Wang, managing director in China for FICO. “The coverage rate or scorable population of the FICO models built using big data AI analytics, covers more than 75 percent of applicants.”

Using the FICO solution has enabled SPDB to approve more people while controlling credit risk. Compared to SPDB’s control group, the FICO big data AI analytics strategy has delivered a 50 percent lower risk level but an approval rate that is four times higher.

Automating Collections

SPDB has also deployed a collections system from FICO, which has automated many tasks and freed human agents to work on high-value cases. FICO’s Customer Communication Services (CCS) solution incorporates machine learning and sophisticated analytics to deliver a collection service that can adapt to the specific requirements of the customer base.

The multi-channel solution can be optimised and adjusted on an ongoing basis, to meet the changing collection business objectives. It is estimated the solution is currently shouldering the volumes previously completed by 60 human agents while maintaining the same cure rate.

The CCS solution has allowed SPDB Credit Card Center to more efficiently utilise its team members on the more challenging collection work. It has also allowed the business to scale in a way that just would not have been possible if the bank had to find, train and deploy more people in the collections department.

SPDB Credit Card Center team continues to test new ideas and contact strategies using a champion / challenger methodology, which promotes successful “challenger” strategies that outperform the current “champions”. FICO Customer Communication Service therefore plays an important role in providing a closed loop for collection optimisation.

Previous to the FICO solution, SPDB was relying on outbound phone calls only. They now have a multi-channel customer engagement system in place for collections. This change helped keep the collection rates high through a clever and systematic system that allows the collections team to follow up with customers at the right time, using the right channel and with the right message.

Joy Macknight, deputy editor of The Banker, one of this year’s judges for the FICO Decisions Awards, said, “I gave SPDB top marks because of their customer-centric success. They are achieving great results by taking a holistic approach to risk management across originations and collections.”

“SPDB has harnessed analytic technologies to reduce their overall risk, greatly increase the proportion of automatic originations, increase approval rates and scale their collections,” said Sandy Wang. “They have skillfully created a data-driven and comprehensive origination optimisation strategy, using advanced decision science technologies and cutting-edge modelling experience from FICO. It has been a fruitful partnership and a project that has yielded significant results.”

Money Advice Trust helps more people in 2017 as demand continues to increase

The Money Advice Trust has today published its latest impact report which outlines the impact of its advice services, training and influencing work in 2017. The report shows that the charity’s National Debtline and Business Debtline advice services helped more people and small business owners to tackle their debts in the year than ever before, as demand continues to increase.

Making a difference: our impact in 2017 highlights the breadth of the Money Advice Trust’s work and the range of ways the charity helped people to tackle their debts and improve the money and debt environment during the year.

In 2017, National Debtline and Business Debtline advisers helped 169,700 people by phone, 50,600 via webchat and had over 1.5 million visits to its websites.

National Debtline provides free, impartial and confidential debt advice, and in 2017 helped 140,500 people over the phone. A further 43,500 were helped through webchat and there were more than 1.36 million visits to the National Debtline website. After receiving advice from National Debtline:
· 93 percent of callers were clear on the next steps to take
· 84 percent were less likely to find themselves in a similar situation
· 77 percent reported a positive impact on their emotional or mental health.

Business Debtline, the UK’s only free dedicated debt advice service for small business owners, helped 29,200 people on the phone, 7,100 through webchat and there were 167,300 visits to the Business Debtline website. After receiving advice from Business Debtline:
· 92 percent of callers were clear on the next steps to take
· 79 percent made contact with creditors themselves
· 86 percent felt they were less likely to find themselves in a similar situation.

The Trust’s Wiseradviser training programme for money and debt advisers, provided training places to 3,231 advisers in 980 free-to-client organisations across the UK, with 4,400 advisers using the Wiseradviser website to access training and learning resources. After training, 97 percent of advisers had increased confidence when advising clients and 94 percent shared their knowledge with colleagues.

In 2017, the Trust expanded its training and consultancy work with the credit industry to improve support for their customers in vulnerable circumstances. Training was delivered to 44 creditor organisations and 6,700 staff. After face-to-face training, 95 percent of staff rated their knowledge as very good or excellent.

The Trust continued its work to influence change in the UK’s money and debt environment. This included responding to 21 policy consultations and engaging with key decision makers on matters ranging from high-cost credit to local government debt collection – as well as raising awareness of debt advice and the issues facing people in financial difficulty through 2,166 items of media coverage.

Joanna Elson OBE, chief executive of the Money Advice Trust, said: “In 2017 we made a positive difference to the lives of more people and more small business owners in debt than ever before, growing our frontline services and further improving access through our digital channels.

“While our advisers continue to help thousands of people each week, demand for our services is increasing as the financial pressures facing many households remain.

“There are also changes on the horizon in the sector with the new Single Financial Guidance Body and the Government bringing forward its new statutory Breathing Space scheme. With the support of our many partners we will to do all we can to continue to help those that need our support most and work to improve the debt environment through these changes.”

StepChange Debt Charity comment on FCA retail banking review – overdrafts

StepChange Debt Charity notes that the Financial Conduct Authority today reports that bank overdrafts are significant drivers of profitability on bank personal current account business, and the regulator’s comment that “we have concerns that unarranged overdaft charges are more likely to be incurred by vulnerable consumers.”

The regulator says that over 30% of personal current account income to banks derives from overdraft revenue. It also found that the margins on overdrafts were significantly higher than on other areas of business – 28%, compared with 8% on credit cards and 5% on unsecured loans [pp 29-30 of FCA report].

Peter Tutton, Head of Policy at StepChange Debt Charity, comments: “Around 50% of our clients last year had overdraft balances running when they came to us. The FCA’s current scrutiny of overdrafts is very welcome, given that unauthorised overdrafts can be a higher cost form of credit than payday loans. The FCA recognises, the majority of unarranged overdraft charges are concentrated on just 2% of current account holders, and unarranged overdrafts are more likely to be incurred by vulnerable consumers. We strongly support the proposals in the FCA’s current consultation on overdrafts that firms should stop charging unauthorised overdraft fees and offer more help to people trapped in persistent overdraft debt. If implemented, these will help to significantly reduce the harm felt by people trapped in what can be a very high cost form of credit.”

Increase in credit card spending could indicate upcoming rent and mortgage affordability issues

Today’s UK Finance figures show credit card spending has risen considerably in May. This could be an indicator of affordability issues, which could have a knock on effect on people’s ability to keep up with rent and mortgage payments.

Mark Pilling, managing director at Spicerhaart Corporate Sales said: “UK Finance figures out today show that credit card spending was 2.3 per cent higher than a year earlier, with outstanding levels of card borrowing having grown by 5.7 per cent over the year. Credit card purchases in May were 193 million – this is well above the previous 12 month average of 181 million.

“While this could just be a good sign that retail sales are starting to pick up, perhaps as a result of the summer weather and the Royal Wedding, we all know the retail sector is currently struggling, so it could be an indicator of wider issues, that perhaps people are being forced to put more of their day to day purchases on credit cards.

“You can’t read an awful lot from one month’s data, but this is quite a significant rise and it will be interesting to see if this trend continues. If credit card debt does continue to rise, we need to be prepared for the knock on affect this may have on other areas, such as people’s ability to keep up with rent and mortgage repayments.”

Oblix Capital joins the ASTL

Oblix Capital, a specialist short term lender, has joined The Association of Short Term Lenders (ASTL) as a new associate member. Membership of the ASTL now stands at 35 full members and 29 associate members respectively.

Oblix Capital is a London based firm, specialising in bridging and development finance. Led by a team of experienced real estate professionals, Oblix Capital provides financial support for both commercial and residential properties throughout England and Wales. Oblix Capital offers a diverse funding base, providing financial flexibility and transparency to borrowers.

Andy Reid, Sales Director, Oblix Capital comments: “Oblix has experienced rapid growth since being founded in 2014 and we see our membership to the Association of Short Term Lenders as our commitment to provide the industry with the high-quality service it deserves.”

Benson Hersch, Chief Executive of the ASTL added: “The wealth of knowledge and insight Oblix Capital offers provides a strong addition to our growing membership here at ASTL. Their transparency and direct approach will certainly prove to be a real asset to our members.”