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Paradigm Shift

15 April 2016

Simon Carr, Sales Development Director

Whilst working on a marketing initiative, a colleague and I were discussing when a second charge bridging finance would be used over a traditional first charge bridging product. It was a discussion which, after visualising different scenarios, we were able to succinctly differentiate why and when a second charge bridging loan would be used.


I once read a book, by Stephen Covey – you know the one – ‘The 7 Habits of Highly Effective People’. What a great book – it's more of a reference manual really – one that you don't just read and put down, but pick up from time to time.

The first couple of chapters focus on changes in opinion and perception, and using a number of pictures, clearly demonstrate what is being taught. One picture is of a beautiful lady wearing a fur throw, pearl necklace and earrings.

The other (which quite frankly still scares me, even today) is a picture of – shall we say a rather old lady, who's seen better days. I can tell this by her unfeasibly large, hooked nose – a marked comparison to the dainty, little button nose of the elegant lady.

Later, you’re shown another picture. However, as your learning grows, you see the image change from old lady to beautiful lady or vice versa, depending on what you saw initially.


Attributed to William Ely Hill (1887–1962) („Puck“, 6. Nov 1915) [Public domain], via Wikimedia Commons

What do you see? Old lady… young lady... or both?


This change in view is referred to as a PARADIGM SHIFT – the minute you see something from a different position. I guess that my discussion with my colleague gave me my very own paradigm shift. I realised that on the 21st March the residential first mortgage and second charge industries changed, becoming one single picture, if you will, after being seen as separate for many years. Perceptions changed for the better. Let me attempt to demonstrate.


Picture 1: Mortgage Agreement


Picture 2: Secured Loan Agreement


Picture 3: Regulated Mortgage Contract


You can no longer ignore Picture 3 – it contains both... watch… stare… give it a go!

Old Lady/Young Lady First charge/Second charge


Paradigm Shift

You are considering both aren’t you?

In summary, same type of contract, same pen, same security – just a different view of the same thing.

See – I rest my case.

Paradigm shift shared.

My work here is done!

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Thinking Cleary: What should influence our referendum vote?

15 April 2016

I can’t wait for the 23rd June! I am hoping that once the vote is cast the uncertainty will start to subside and the media will have a different topic to write about. Whilst I am getting slightly bored of the Brexit debate I do fully understand how important the outcome is to every man, woman and child in this country.

Even if you have no interest in whether we stay or whether we go you will be impacted by the outcome. I personally think that the arguments being put forward by politicians on both sides of the debate are, quite frankly, indecipherable. Neither side is saying anything useful that the average person on the street can use to make up their mind and I fear this is only going to get worse as we get closer to the vote.

I decided quite a while ago that I was not going to rely on anything being said by politicians as to how I am going to vote on Europe. As a result I made my mind up ages ago and now I am pretty much ignoring the media. There are two things I think about when weighing up how to vote: first, how will the outcome effect my family, and secondly what will be the impact on the country. In reality the second is how will the effects on the country affect my family, so it’s all the same thing really. I honestly do not know whether it is better in the long run to exit or stay and anyone who says they know is either a liar or deluded. However, I am firmly in the remain camp and here are my reasons why.

My job

I, like you, work in the mortgage market and one thing that the mortgage market does not like is uncertainty and an exit would bring years of it. Bear in mind it took Greenland, which has a population roughly the same size as St Albans, over 3 years to decouple from the EU’s predecessor in 1985. It is therefore, highly likely it will take the UK considerably longer.

As part of my job I speak to institutional investors and capital markets people regularly and without exception every one of them has asked us for our views on the impacts of an exit and what are we doing about it.

These are the people that help fund the mortgage market and indeed to some extent are price setters so uncertainty for them is not a good thing. Our response as a business is that it is impossible to anticipate the first, second, third, fourth order effects of an exit. However, the one that is most troublesome is a significant drop in the value of Sterling leading to rapid rate rises; this would hurt mortgage borrowers, lenders and intermediaries alike.


The UK is simply too small to compete with other countries. Whether it be defence or economics we are competing with 1.5 billion Chinese people, 1.5 billion Indian people, 350 million Americans and 700m Europeans if we decided to exit. In nature there is generally safety in numbers.

Old age

The country’s weighted average age is increasing as we live longer. Without young people, whose National Insurance payments will fund the state pension? Where are all the nurses, police, plumbers and construction workers going to come from? The fact is that in order to maintain or improve living standards a country has to grow in the long run and growth takes people. Positive net migration is crucial and by closing our borders we potentially become insular and irrelevant as a nation.

I am also ignoring the polls which so spectacularly got their numbers wrong on the outcome of the General Election and the Scottish vote. Instead I look at what the odds are at the bookies as they have their balance sheets on the line if they get it wrong. Odds for us staying in the EU are 2/5 giving an implied probability of 71.43%.

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21st March 2016: Independence Day

09 March 2016

Simon Carr, Sales Development Director

It's like the remake of an epic blockbuster.

Let me take you back to 2007-2008, when several unprecedented events converged to create what some economists have described as the worst global financial crisis since the Great Depression of the 1930s. This was a time when the UK mortgage intermediary market felt the impact by watching lending criteria tighten.

In 2009, the regulator announced its intention to review the mortgage market and sought to introduce a stable and sustainable responsible lending environment. The result of the review introduced changes in 2014 which saw the introduction of robust affordability checks, ensuring customers could afford payment commitments to their secured debt, both in today’s low rate environment but also as interest rates increase. Additionally, in what should now be seen as a positive step, the regulator introduced the requirement for advice to be mandatory on mortgage sales. The latter saw direct to consumer lenders suffer delays to service, resulting in more customers seeking advice from mortgage intermediaries.

In this sustainable environment, we have seen the availability of products increase and perhaps, more importantly, demand for independent advice taking a strong hold.

But it isn't over… the story continues and on 21st March 2016 (this date being the deadline) another event is set to signal change. Your battle for independence will be challenged. Changes brought about by the European Mortgage Credit Directive (EMCD) and applicable changes to the Mortgage Conduct of Business (MCOB) mean that you can only be truly independent if you consider the entire market as part of your advice process.

So what's the problem? Initial disclosure requirements mean that you must define your scope of service - if you don’t offer products representative of the market you may find that you cannot continue to use the title “independent”. What is clear is that many mortgage intermediaries have considered what this means and recognised that for those customers looking to capital raise, they should be considered for a second charge as well as a remortgage. After all, a remortgage and a second charge are both described by the regulator as a ‘regulated mortgage contract’.

What's clear is that Principles 6 and 7 set out high level standards when considering the needs of your customers. MCOB 4.4A describes your obligations during initial disclosure and further describes what is considered to be independent.

For those mortgage intermediaries who have already considered their scope and requirement to offer second charge loans, I am sure that you will have made your own arrangements. Alternatively, you will have approached your mortgage club (if directly authorised) or engaged with your network (if an appointed representative) to discuss your requirements and source the correct solution.

We all resist change – it is after all human nature. Many see change as a negative, but others see it as a huge opportunity.

The Mortgage Market Review and the EMCD bring about sustainable market conditions and drive sound customer-centric outcomes. The changes in the regulation of second charge loans and how they are treated give you an opportunity to provide the right solution for your customer. If you don’t have a solution in place, speak to a mortgage club or your network and voice your concerns regarding the products you would like to offer and ask for their assistance.

It’s not quite 4th July, but 21st March heralds the day of Mortgage Independence.

The next thing you know, we’ll all be talking about the resurgence of the second charge market. Now that's a film I'd watch!

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Thinking Cleary: Happy staff mean happy customers

09 March 2016

The Sunday Times recently released its 16th annual 100 Best Companies to Work For list, which includes six firms from the mortgage market.

The data gathering and analysis behind the list are extensive and the outcome is largely dictated by the firms’ employees, who fill out the survey. A total of 241,361 employees completed the survey this time around, answering questions about their firms and their bosses, whether they thought their rewards were fair and how much they felt their wellbeing was valued, among other things.

At the heart of these leading companies is culture. This is something many of the large banks have got wrong and, as such, it was no surprise to see none of them listed. By far the largest mortgage firm to win an award was Nationwide Building Society, which achieved an impressive third place in the large-employer category. According to the data, its 17,735 staff are well aware of the organisation’s strong social conscience.

In the mid-sized category, Charter Court Financial Services (also known as Precise Mortgages) came tenth. Founded in 2008 with just 27 staff, the company has grown to two divisions – a savings bank and a mortgage lender – and more than 300 employees. Staff rate the organisation highly, putting it in the top 10 for the categories of ‘fair deal’, ‘wellbeing’, ‘leadership’ and ‘my company’ .

They also say they are excited about where the business is going.

Skipton Building Society was a winner too, with employees considering the mutual to be run on strong values. Staff can put forward suggestions via an intranet forum and questions can be submitted to chief executive David Cutter. It is also possible to buy or sell up to two days’ paid leave a year in exchange for salary.

Also on the list was Just Retirement, with staff believing they could make a valuable contribution to the success of the organisation.

Meanwhile, Hanley Economic Building Society achieved success on the best small company list. Seventy-five per cent of the firm’s managers have been promoted internally. Their development has included external leadership and management courses and/or qualifications.

Last but not least, congratulations to Gopher Money, which was the only mortgage broking firm to claim a place in the list. The survey found the firm values the attitudes of its employees and aims to create a flexible workplace in which people feel motivated and supported. Founded five years ago, it now has 130 employees, with 90 per cent of them having been promoted internally. Staff feel they can speak out when things are going badly and they view bosses as role models.

I can speak only on behalf of ourselves but we spend a decent proportion of our company resources on ensuring our culture is one we are proud of. Underpinning everything we do are our ‘REACH’ behaviours: respect, excellence, attention, challenge and honesty. I suspect all the winning firms have something similar in place, as indeed do many of those not included in the list.

Notice there is no mention of business levels or profits. Obviously both are highly important but I expect that for most, if not all, of the winning firms, such factors are an outcome of having a great culture. After all, happy customers start with happy employees.

It would be great to see more mortgage firms in next year’s Sunday Times awards and I know many on the distribution side that would be worthy winners.

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Wolverhampton Firm Tops Sunday Times List

01 March 2016

Charter Court Financial Services (CCFS) which is based in Wolverhampton has been ranked tenth in The Sunday Times Best 100 Companies to Work For 2016.

The firm employs over 350 people at its headquarters in Wolverhampton Business Park and owns Charter Savings Bank, one of the UK’s leading challenger banks with over 40,000 savings accounts and balances in excess of £1.7billion since its launch in March 2015.

Over the past eight years CCFS has experienced unprecedented growth, and is a significant employer in the area. Since 2008 the workforce has grown from just 20 employees to 362.

Ian Lonergan, CEO of CCFS commented: “With the launch of Charter Savings Bank and developments in our mortgage business, the business has trebled in size in under two years. But we don’t want this growth to change how we do business or alter our friendly work environment. We have a fantastic team and we always look for ways to make work a more positive and rewarding experience for them so it’s great to have our efforts recognised by our employees and The Sunday Times. We are always on the lookout for more talented people to join our team and this award will undoubtedly help us achieve that in the future.”

The Sunday Times Best Companies to Work is a highly prestigious award which champions the importance of maintaining a happy and motivated workforce in successful high growth businesses.

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