Consumer finance new business falls by 1% in September

New figures released today by the Finance & Leasing Association (FLA) show consumer finance new business fell by 1% in September, compared with the same month last year. In Q3 2018, new business grew by 5% compared with the same quarter in 2017.

In September, credit card and personal loan new business together grew by 4% compared with the same month in 2017, while retail store and online credit new business increased by 8%. The value and volume of second charge mortgage new business both grew by 11% in September.

Commenting on the figures, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “The fall in consumer finance new business in September was the first since April 2017, and in part reflects the impact of recent changes to emission standards for new cars on the POS consumer new car finance market.

“In the first nine months of 2018, consumer finance new business grew by 8% compared with the same period in 2017, in line with expectations of single-digit growth in the year overall.”

Asset finance market reports new business stable in September

New figures released today by the Finance & Leasing Association (FLA) show that asset finance new business (primarily leasing and hire purchase) in September was at a similar level to the same month in 2017. In Q3 2018, new business grew by 6% compared with the same quarter in the previous year.

New finance for IT equipment and plant and machinery grew in September by 60% and 3% respectively, compared with the same month in 2017. Over the same period, the business car finance sector reported a fall in new business of 20%1.

Commenting on the figures, Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “Asset finance new business continued to grow in the third quarter despite continuing uncertainty about the outcome of the Brexit negotiations. The market is on track to report new business growth of around 5% in 2018 as a whole, reaching a record annual total of £33 billion.”

Borrowers being let down because the mortgage industry is “not fit for purpose”

The mortgage industry is failing to keep up with modern borrowers’ needs, it has been claimed, after a new survey revealed more than half were rejected for lifestyle choices including being self-employed or buying a converted home.

A study of the market commissioned by lender Together found a huge percentage of mortgage applicants – 54 % who’d fallen out of the application process – had been denied a home loan for reasons that could be considered ‘normal’ by most people.

These included factors once believed to be ‘non-standard’ such as their employment type; they could be self-employed, a contract worker or take a dividend, or the type of property they were looking to buy, including conversions or high-rise flats.

Pete Ball, personal finance CEO at Together, said many mainstream lenders needed to keep pace with the demands of these types of borrowers. Some banks and building societies remained reliant on a computer-automated approach, and outdated and rigid criteria – when deciding mortgage applications, he said.

“The world has changed,” said Mr Ball. “People’s pay, working patterns and pensions have altered beyond all recognition from 30 or 40 years ago. Even where they live, who they chose to live with, or the type of property they want to buy is vastly different from a generation earlier.

“What was previously thought to be ‘normal’ simply doesn’t exist anymore.”

Together’s wide-ranging study, which was conducted by market researchers YouGov, surveyed about 2,000 people about mortgage applications and the reasons why some of them had fallen out of the mortgage application process.

It builds on earlier research by the Intermediary Mortgage Lenders’ Association (IMLA)* which revealed a significant proportion of the UK population fail to secure a home loan between an initial enquiry and the time they would receive a mortgage offer.

The latest survey discovered that, of those rejected, 12% were denied because of their employment type, while 3% had insufficient employment history. This could be despite potential borrowers being in a good position to repay their mortgages.

One in ten (10%) were denied because the property they wanted to buy was considered ‘non-standard’, which could mean anything from a converted barn to a high-rise apartment.

Self-employed workers are also being “locked out” of the mortgage market by some lenders, Mr Ball said. Labour market data shows the population of people who are working for themselves has soared by a quarter in the past decade to 4.8million**, making them a cornerstone of the UK economy.

Millennials – those aged between 18 and 34 – were worst hit overall – with two thirds (66%) who took part in the survey failing to get on the housing ladder because of the way they live and work nowadays, which may mean they do not meet some mainstream lenders’ criteria

Older people also seem to be missing out, the research suggests. A total of 46% of over 55s were denied home loans, some because they were too near retirement age. This could pose a growing problem in the future, as the age of the UK population rises, said Mr Ball, with the number of people aged 65 and over in England and Wales is projected to increase by 65 per cent to more than 16.4million in 2033.***

Andrew Montlake, of mortgage broker Coreco, said: “Across the country, people are living and working longer and have varying ideas of what their perfect home will be at different stages throughout their lives.

“Unfortunately, much of the mainstream mortgage market has been slow in catering for these potential borrowers, who make up a wide section of society. The market needs to continue to adapt to make sure it remains fit for purpose.”

Additionally, nearly one in five (18%) people who took part in the Together survey were turned down because they had a low credit score or a lack of credit history.

Surprisingly, fewer than one in ten (9%) of those who took part in the market research said they’d been turned down because their deposit was too small and 16% said they were not earning enough to afford repayments on their home loan.

Over a quarter (27%) of rejected applicants who did not obtain a subsequent mortgage were put off ever going through the process again – shelving their dream of owning their own property – rising to 32% for over-55s. One in ten (10%) of those who withdrew a mortgage application/ enquiry the last occasion they were unsuccessful pulled out before receiving an offer as they found the process too complicated, and 7% said there were too many stages.

A disappointing 28% who were originally unsuccessful have not secured a mortgage.

Mr Ball said: “As a lender, we’ve been providing flexible, common sense lending for over 44 years, so we recognise that was once considered unusual or specialist is now becoming more normal, and the mainstream needs to be able to adapt to the changing world.”

Hanley Economic BS launches RIO mortgage range

Hanley Economic Building Society has launched a range of retirement interest-only (RIO) mortgages to support borrowers and intermediaries in their later life lending requirements.

The range is based around two main products. The first being a 3.49% Variable Discount at a maximum LTV of 50% for house purchase and remortgage purposes. The second being a 3.74% Variable Discount with a maximum LTV of 65% for house purchase and remortgage purposes.

The minimum loan size for the range is £10,000, with a maximum loan size of £750,000. There is a minimum age of 55 years with no maximum age and the borrower(s) must be retired. For joint mortgages each borrower will need to afford the mortgage in their own right.

If borrowers have a Lasting Power of Attorney (LPA) in place Hanley Economic Building Society will further discount the headline rate by 0.50%, and it will apply this discount at a later date should borrowers wish to obtain an LPA further down the line.

David Lownds, Head of Marketing & Business Development at Hanley Economic Building Society, commented: “As mutual building society we realise the need to support borrowers throughout their lives. Our retirement interest-only mortgages aim to fit the needs of older borrowers who are looking to remain within their current home but use some of the equity to fulfil a better retirement. For some this will mean carrying out home improvements, for others it will be to help their children or grandchildren to get onto the property ladder.

“We are encouraging borrowers to have a Lasting Power of Attorney (LPA) in place by offering a 0.50% discount off the initial pay rate. An LPA provides peace of mind that the finances of a borrower are managed in the event of any health issues in later years.”

One in five Brits would never inform a partner of their debt situation

Almost one fifth of Brits (19%) would never inform a partner of their debt situation, according to new research by Equifax, the consumer and business insights expert.

The survey, conducted online with Gorkana, found those aged 65 and over (29%) are almost twice as likely as those aged 18-24 and 35-44 (both 12%) not to reveal their debt to their significant other.

Meanwhile, only a third of respondents (32%) would inform a new partner of their debt situation within three months of beginning a new relationship. Of those, men are more forthcoming than women – 37% vs 27% respectively.

Furthermore, over a third (35%) of people who are either married or in a civil partnership do not have a shared bank account, with the proportion rising considerably for people earning less than £20,000 (71%).

The research also revealed more than half of people (51%) have never helped a family member with their debt. Of those who had, they were more than twice as likely to have given them money (35%) rather than advice (14%) to help with their financial difficulties. Respondents aged 65 and over were the least likely to give advice (9%), and also less willing to discuss money issues at the dinner table (45%) compared to 18-24 year olds (59%).

Commenting on the findings, Richard Haymes, Head of Financial Difficulties at TDX Group, an Equifax company, said: “Our research shows that when it comes to talking about debt it remains a taboo subject, even with our friends and family. In an environment where people are borrowing at record levels, it’s concerning that they feel they can’t be open about their situation.

“It’s encouraging to see that younger generations are bucking the trend and are being more transparent about debt and money problems. This age group are faced with factors like rising higher education fees and familiarity with a low-cost credit environment, which could be aiding with normalising the concept of debt.

“People may be reluctant to divulge details of their finances to family and friends, but by carrying the burden of debt problems alone, they risk further escalating their situation. Recognising the signs of financial difficulty, informing creditors at an early stage and availing of resources such as Citizens Advice and StepChange can alleviate the stress of debt and lead to better outcomes for all involved.”

New report to build evidence base for Government’s dormant accounts financial inclusion initiative

The Big Lottery Fund, the UK’s largest community funder, has today published a new report that will help build the evidence base for the Government’s dormant accounts financial inclusion initiative. The report – Understanding the decision making of people who are experiencing financial exclusion – builds upon existing financial exclusion knowledge by sharing the stories of those with real life experience of struggling to access fair, appropriate and affordable financial products and services.

The report identifies some of the key challenges faced by the financially excluded. Contrary to popular perception, it identifies that many of those turning to high cost credit are fully aware of the extortionate rates they will be charged, but feel they have no choice but to go ahead with the provider. This is because they need the money urgently and for a necessity – leaving them feeling backed into a corner and unable to take the time to shop around.

Others are also aware that they are unlikely to be accepted by a cheaper, mainstream lender. This is exacerbated by low awareness of responsible lenders, such as credit unions and Community Development Finance Institutions, coupled with a perception that high cost lenders aggressively target low income areas with their marketing.

The research took place in a series of sessions held earlier this year with 62 people from a variety of backgrounds and situations, including unemployed and underemployed women from minority ethnic groups, young and lone parents, people in work on low incomes, and young men who have left care in the last few years. It focused on three financial products: credit, savings and insurance for people with less than £500 in savings. It shows how those already using high cost credit are caught in a spiral that they struggle to get out of – to break the cycle they need to be able to save money, but the high cost of credit repayments prevents them from being able to set money aside.

Even where people are not making credit repayments, most say that they find it hard, or impossible, to save regularly. Despite this, many budget carefully and make small, ad hoc savings – usually cash in jars – that they dip into as necessary. While it’s important for them to have easy access to money to help them get by, this means that their savings rarely build up.

When it comes to insurance, there is low awareness of home contents insurance – particularly among younger people – little trust that insurance companies will pay out in the event of a claim and a perception that insurance is expensive and difficult to understand. Although most councils offer their tenants ‘add on’ contents insurance (added to their rent for a low weekly cost) awareness of these schemes is also low.

Overall, feedback from the sessions was that credit needs to be ‘decided quickly, from a trusted source, and ideally flexible’; savings need to be ‘easy to do and not too easy to stop’; and insurance needs to be ‘understandable, appropriate, and from a trusted source’.

The report is to form part of the evidence-base underpinning the Big Lottery Fund’s involvement in a £55 million funding strand intended to focus on tackling financial exclusion. This was announced earlier this year by the Department for Digital, Culture, Media and Sports (DCMS). The funding comes from bank and building society accounts that have not been used for fifteen years and where customers cannot be contacted. These are known as dormant accounts and the £55 million will be awarded to a new dedicated Financial Inclusion organisation, which will operate independently of government.

The research was conducted through telephone interviews and focus groups held across the country between March and June 2018. Participants were asked about their experiences and attitudes towards borrowing money, insurance products, and making savings, and any challenges they’d faced in doing this. Participants were also encouraged to give suggestions for possible solutions they thought would work best for them.

Gemma Bull, Big Lottery Fund Portfolio Development Director, England said: “Those who are living with the daily effects of facing barriers to financial inclusion are best-placed to tell us what solutions would make things better. We hope that the end user perspective reflected in this report will be useful in supporting the work of not only the new Financial Inclusion organisation that is being set up, but also other funders, policy makers and practitioners as we seek to tackle the challenge of improving access to fair and affordable financial products and services for all.”

Steve Cox joins Fleet Mortgages as Distribution Director

Fleet Mortgages, the buy-to-let and specialist lender, has today (5th November 2018) announced that Steve Cox has joined the business as its new Distribution Director.

Steve will be working closely with the management and sales teams at Fleet Mortgages, helping to develop and establish both new and existing relationships, and to ensure the lender’s product proposition works in both its core areas and potential new ones.

Steve was previously Business Development Director at Hodge Lifetime where he had worked since April 2016 and was responsible for lifetime and equity release sales. Prior to this Steve spent eight years as Head of Commercial Development at Sesame Bankhall Group.

Steve brings with him an excellent reputation and a commercial outlook towards business, plus he has established relationships with many of the key networks and mortgage clubs that Fleet already work with.

Fleet Mortgages has also announced that its BDM, Chris Barwick, who previously covered the North East will now be covering the North of England.

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.

Bob Young, Chief Executive Officer of Fleet Mortgages, commented: “We are very pleased to announce that Steve Cox has started work at Fleet Mortgages today as our new Distribution Director. We have been very much looking forward to him joining the team here – he brings with him a wealth of experience and is one of those rare individuals within our industry that has worked across both broker and lender roles at a very high level. This type of knowledge and expertise will be a huge boost to Fleet Mortgages and I have no doubt that Steve will hit the ground running and will help develop our offering and proposition in both our established product areas and a number of new ones.”

Steve Cox, Distribution Director at Fleet Mortgages, said: “This role was a very attractive one – too good to turn down – and I’m therefore very pleased to be finally starting at Fleet, where I believe I can offer a great deal of experience and insight, plus the ability to help push this business. Fleet already has a strong reputation for quality and service, and the team that’s been assembled is second to none. I’m excited to be working here and dealing with the large number of distribution partners we currently have. This is an exciting time for the business and there are plenty of opportunities to explore.”

TransUnion Announces Agreement to Sell Noddle Business to Credit Karma

TransUnion, the global risk and information solutions provider, has announced today an agreement to sell its Noddle business, the UK-based free-for-life credit reporting and monitoring service, to Credit Karma. TransUnion acquired Noddle earlier this year as part of its acquisition of Callcredit, the second largest credit reference agency in the UK.

“TransUnion is excited to bring these companies together,” said John Danaher, TransUnion’s president of consumer interactive. “Noddle and Credit Karma are well-matched, both embracing a ‘consumer-first’ approach to offering free information monitoring and financial health solutions. We are confident the business will continue to thrive under its new ownership and that this divestiture is a positive move for all parties, including UK consumers.”

Credit Karma is a personal finance technology company with more than 85 million members in North America, including almost half of all millennials. The company offers a range of personal information monitoring, as well as financial health improvement products that are free for members. Credit Karma’s tremendous growth in the US and Canada has been largely through offering award-winning user experience and free access to actionable tools that help their members make the most of their money.

“Our mission is to help people make financial progress, and that extends beyond North America,” said Kenneth Lin, CEO and founder of Credit Karma. “For over a decade, we’ve enabled our members in the US and Canada to take control of their finances by giving them free access to their financial information. We’re confident the acquisition of Noddle will help us deliver on our mission in the UK and welcome the opportunity to expand our partnership with TransUnion globally.”

Once the acquisition is complete, TransUnion will continue to supply Credit Karma’s members with complete access to all of their credit reports and scores. TransUnion and Credit Karma are already partners in the US and Canada, with a relationship that spans more than a decade.

Advisers urged to help landlords with potential fallout HMO licensing changes

Advisers have been urged to help those landlords who may be receiving letters from lenders about their mortgages, following the recent changes to the HMO licensing requirements which are thought to mean a further 177,000 properties now require a HMO license.

Speaking at today’s FSE Midlands, the premier exhibition for the financial services industry which is taking place today at the Ricoh Arena in Coventry, both David Whittaker (Keystone Property Finance) and Adrian Moloney (OneSavings Bank) highlighted how some landlords were already receiving letters from their buy-to-let lenders regarding properties which may now require a license.

They outlined that the original mortgage would not have been granted on a HMO property and landlords in such a position have received letters which tell them to revert the property back to a single let or pay back the loan.

One FSE Midlands broker delegate said a number of her clients had received letters from “one of the two big ‘mainstream’ buy-to-let lenders” even though they had made no changes to the property and it has been a Government decision to change the licensing requirements.

Both Whittaker and Moloney suggested this was increasingly happening and that advisers would potentially need to find new mortgages for their landlord borrowers in such a position.

Whittaker bemoaned those lenders who were sending such letters, saying: “Landlords are punch-drunk from the regulatory changes of the last few years. This is the law of unintended consequences in full effect and you would expect some common sense from lenders. Lenders should say that, as long as there are no changes to the property or that the landlord doesn’t want a further advance, that they can keep the loan.”

Advisers were also warned that the recent changes meant that buy-to-let was no longer a transactional undertaking. “Advisers have to move to a new place with buy-to-let from transactional to advisory,” said Whittaker. “Next year on the 23rd January 2019 when landlords file their tax returns, it will be the first year of a four-year wake-up call. This is when they will need you; you have to help your landlords to the other side.”

Both Moloney and Whittaker were not surprised by this week’s Budget which did not introduce any landlord-supporting measures, such as rolling back extra stamp duty charges or a u-turn on the cuts to mortgage interest tax relief.

“Hammond is not called ‘Spreadsheet Phil’ for nothing,” said Whittaker. “He was never going to take them away. The best was that he would damn well leave it alone. Let’s be honest, he didn’t have much room to do anything in our world.”

Prior to the Budget there was a suggestion that landlords might be able to get CGT relief if they sold their properties to long-standing tenants. Both Whittaker and Moloney were not surprised that this didn’t make the Budget. “It was never going to fly,” said Whittaker. “Anything that would line the pockets of landlords is not going to happen. HMRC and the Chancellor see the landlord community as a group that traditionally hasn’t paid its wedge. Landlords do not draw any empathy in the corridors of Whitehall.”

Moloney expressed scepticism that any such policy would work in the first place. “If your investment is good why would you get rid of it?” he asked. “Sales of property investments have not been really picked up in the main by first-time buyers anyway, they’ve been picked up by other landlords.”

Looking ahead to 2019, Moloney was positive about the opportunities for advisers in the buy-to-let space. “Remortgage has been the mainstay of the market for some time and has definitely benefited this year from a roll-off in two-year money,” he said.” Next year is a great year of opportunity because it will begin to bite people in the pocket.”

Whittaker agreed but warned advisers to be aware that an increase in five-year remortgage deals could impact on business levels. “Those who would normally be on two-year deals may now be on five years,” he said. “And so you won’t be having that remortgage conversation for another 36 months, so it’s important that you should look at your business modelling because of this.”

FCA’s mortgage market study final report due Spring 2019

The industry should not expect the FCA’s Mortgages Market Study Final Report and recommendations until Spring 2019 at the earliest.

That was the view of a panel of mortgage experts who were taking part in ‘The Big Mortgage Panel’ debate which took place at today’s FSE Midlands event, the premier exhibition for the financial services industry, which is taking place at the Ricoh Arena in Coventry.

Robert Sinclair of the Association of Mortgage Intermediaries (AMI), who is sitting on two working groups related to the regulator’s Mortgages Market Study Interim Report, said that the Final Report and recommendations were not anticipated to be published until just before the “regulator’s year end”, at the end of March 2019.

Martin Reynolds of Simplybiz said: “I think the regulator is still conferring on all the, shall we say, vociferous responses it received in relation to the Interim Report, so it’s not anticipated until the Spring.”

Sinclair did give some further information however on a potential ‘adviser comparison’ and ‘consumer eligibility’ tool – both of which were measures announced in the Interim Report.

“It is a little perverse that the FCA wants to build a new tool for the regulation of firms, and then a form of register to put advisers on,” he said. “Which they’ve paid £200k to someone not to do it themselves and they’re also looking to build a separate mortgage adviser tool.”

He added: “The good news for advisers is that all the trade bodies are in the room when this is being discussed because sometimes when regulators get involved in this type of thing, it can turn out to be a crock of shit. And there is no lack of consensus from your representative bodies on these issues. We are all very aligned on what we’re saying to the regulator on this. ”

Sinclair was however keen to stress that there could be some major benefits for advisers. He said: “There are opportunities with both of these tools, in terms of how advisers engage with lenders, and how consumers find the right advisers with the right skills and the right services.”