Alan Cleary - Managing Director of Precise Mortgages
When it comes to the business of specialist lending — be that residential, buy-to-let, bridging or second charge loans — we often write about it in the media in terms of numbers.
How much can your client borrow? What’s the maximum LTV, loan-to-income, gross development value? What’s the rate, what’s the fee, what’s the proc fee? We are governed by numbers: the bank base rate, Libor, inflation, cost of funds, profit margins, risk capital ratios, interest rate stress tests, affordability… I could go on and on.
But, as anyone who works in the industry knows, while numbers are important, so are people.
We seem to write far less about just how critical people are in this business, but it is relationships and experience that really make this market work. This is especially true in the bridging sector, where the community of lenders and brokers is really quite small.
In bridging, people buy people. It’s a totally different approach from the residential market, and even buy-to-let, where people buy products.
Brokers know better than anyone just how fundamental relationships are to getting cases completed. There also needs to be trust between lender, broker and borrower before the funds are released. In a market where some lenders come and go, that becomes even more important.
At Precise Mortgages, we’re acutely aware of the value of looking after our relationships.
We’re proud of our approach to both people and product. It’s no use being cosy with developers whose cases don’t add up; there’s also no point in offering the best rates in the market, but failing to understand what brokers and borrowers need from us to make a case work.
We also understand the value of cross-pollination between the different markets we’re in: a lot of the responsible lending practices we learned in the residential market have served both us and our borrowers well in the short-term sector.
Remember the days when some bridging lenders were charging borrowers interest on money they hadn’t even drawn? And then charging fees on that interest? Gone, largely, in no small part down to the determination of lenders, such as ourselves, campaigning to stamp out sharp behaviour that just isn’t treating customers fairly.
There’s also value that the bridging market can add to the residential side, and I think it’s becoming increasingly apparent. Mainstream mortgage lending likes tick-box process, it likes big volume because it’s low margin and that means keeping costs as low as possible.
Increasingly, that’s not serving all customers well. Most people don’t fit into boxes, and as the way we live and work evolves — longer working lives, a rise in part-time jobs and flexible contracts, more and more self-employed and complex incomes — that’s just going to become more common.
This is where relationships become vital; when a borrower or a case makes common sense, but it falls outside the typical numbers, being able to have a conversation can be the difference between securing a home or losing it.
Bridging brokers know this, it’s their bread and butter. There are plenty of mainstream brokers who know it too, and they do a roaring trade in helping customers who don’t meet high street criteria. We believe that more mainstream brokers can benefit from learning about how relationships with a specialist lender can help them serve more customers better, too.
The key here is balance, and it’s something we’re committed to. That’s why we run workshops around the country, educating brokers about our products and processes so they get to know the numbers. It’s also the reason we’ve expanded our sales team. We now have more BDMs in more parts of the UK than ever before, because we know that quickly being able to get hold of someone you know matters.
New research* for Precise Mortgages, the UK’s leading specialist lender**, shows more than half (52%) of landlords use letting income to boost earnings from a full-time job. The findings highlight the need for lenders to offer top slicing to help more customers achieve greater flexibility on buy to let products and loan size.
The study found that even among landlords with bigger portfolios many are still working full-time and have other earnings beyond letting income. Around 32% of those with 11 to 19 properties say letting income supplements day job earnings while 18% of those with 20-plus properties have other income in addition to rental earnings.
Precise Mortgages has enhanced its top slicing feature, which enables customers to use surplus portfolio or earned disposable income to prove they can meet any financial stresses on a new loan application rather than through the rental income of the property alone.
It is now accepting top slicing on all eligible personal ownership, limited company, portfolio, HMO, and holiday and student let applications. First-time buyers are excluded.
Across the market as a whole one in three (33%) landlords earn their living purely from their property portfolios, rising to 47% among those with six to 10 properties. Around one in six (16%) landlords plan to add more properties in the year ahead with 71% funding purchases with a buy to let mortgage.
The research also found that 33% of landlords earn their living purely from their property portfolios, rising to 47% among those with six to 10 properties. 16% of landlords plan to add more properties in the year ahead with 71% funding purchases with a buy-to-let mortgage.
Alan Cleary, Managing Director of Precise Mortgages, said: “Given that the majority of landlords have other earnings that can be used to show they can meet underwriting standards, lenders need to reflect this in their product offering to support landlords accordingly.
“Top slicing allows landlords to manage their properties in a way they choose and gives them greater access to the products and loan sizes they want and particularly for those who may have been restricted by ICR requirements in the past.”
Precise Mortgages’ top slicing feature can help brokers and their customers to access its range of 2-year Fixed rate buy to let mortgages as well as its 5-year Fixed rate products. The specialist lender has also streamlined the application process and enhanced its online buy to let calculator.
Full details of Precise Mortgages’ top slicing feature are available at precisemortgages.co.uk. Brokers can access the online calculator at precisemortgages.co.uk/Misc/BTLCalculator
* BDRC Q1 2019 Landlords Panel syndicated research report prepared for Precise Mortgages. Fieldwork was conducted online between 15th and 26th March among a sample of 829 National Landlords Association members ** Source: BVA BDRC Project Mercury Report Q4 2018
Alan Cleary - Managing Director of Precise Mortgages
Irregular incomes and complex accounts should not be a barrier to self-employed workers when it comes to securing a loan, says Alan Cleary of Precise Mortgages.
The make-up of the UK’s workforce is changing. The recent announcement that the number of people in work in the UK is the highest since records began in 1971 is something to be welcomed, but that only tells half the story.
The UK also has a record number of people working for themselves. According to the latest government figures, of the 32.7 million people now in employment, 4.83 million of these are self-employed. These workers can take many forms – from professional landlords to tradespeople, taxi drivers to freelancers – but one thing they can all experience is a difficulty in securing a residential mortgage or loan.
So with more people than ever before now working for themselves, why are so many of them still struggling to get the mortgages they want?
The Mortgage Market Review in 2014 saw the introduction of new rules to ensure borrowers are only accepted for mortgages they can afford. All prospective borrowers must now prove their income, so the difficulty people who work for themselves have is providing that evidence, as their income can fluctuate from month to month.
Many lenders require more proof of employment from self-employed people than they do from employees; the most common difference being a two- to three-year history compared with just 12 months for salaried employees. As many lenders perceive their financial situation as being too complex or their income as too irregular, it means there are a growing number of potential borrowers unable to access the mortgages they require, as well as an increase in brokers struggling to place their customers’ cases.
Fortunately, specialist lenders understand the challenges and complexities of these cases, and can provide solutions to customers who fall outside of mainstream lenders’ criteria.
Since MMR came into force, these lenders have been in the vanguard of ensuring self-employed workers can still access mortgages.
Specialist lenders have experience of reading financial accounts and SA302 statements, and have the risk management processes and skilled underwriters in place to ensure a good outcome for the borrower, broker and lender.
Many specialist lenders accept one-year figures and will take other income sources, such as pension contributions and car allowances, into consideration.
So if you are approached by a self-employed customer who is struggling to get the mortgage or loan they want with a mainstream lender, make sure they know there are other lenders out there who can help them.
With the number of people working for themselves growing, it has never been more important that they can turn to lenders who take a common-sense approach, taking each customer’s individual circumstances into account and assessing every case on its own unique merits.
Financial Reporter spoke to Danielle Evans, our BDM about the importance of good packaging and who she would nominate in the WRAs.
FR: What area do you cover?
I cover the East Central area. My patch stretches as far north as Huddersfield, down as far as Milton Keynes and everything in the East Midlands.
FR: If you had one ‘top tip’ for life as a BDM, what would it be?
Keep plenty of spare change in the car for parking as not everywhere has functioning ‘pay by phone’ facilities. Also, spare tights in the winter for the ladies. I can guarantee you’ll get some ladders at some point!
FR: How do you pass the time on the road - books, podcasts, audiobooks?
I’ve recently learned how to keep up with technology and discovered that my hands-free can add reminders into my diary. If I’m not answering voicemails, I’m calling out to book meetings for the coming weeks.
FR: What’s one thing you wish all brokers knew?
Brokers know the score. We’re all working towards the same goal which is to get the case completed for the client. The importance of good packaging is the key message I’m delivering at the moment, as well as the importance of adding notes to the case. This means that underwriters are best equipped to make a decision quickly and we can achieve the end goal much sooner.
FR: A quick email on Monday or a phone call in the afternoons - how can brokers contact you?
Either way. I return calls directly through the mailbox so ideally calling from the number they want me to call back on means we can discuss the case more quickly. If you can’t get hold of me, our dedicated intermediary support team is on-hand to answer any questions you might have by calling 0800 116 4385.
FR: What’s your favourite place to stop for a coffee when you’re between meetings?
I am partial to Costa Coffee, but any place that does caffeine will do!
FR: Financial Reporter has recently launched its second Women’s Recognition Awards – who would you nominate and why?
Our head of key accounts, Liza Campion. She’s one of the most hardworking and intelligent women I’ve worked with and is constantly 100mph (not in the car of course!) She always goes out of her way to help everyone. Well worth the nomination!
In an interview with Bridging & Commercial, Dan talks about educating brokers and challenges in the bridging market.
You recently restructured your sales team. What are you responsible for in the new specialist distribution manager role?
As a lender, Precise Mortgages now has more BDMs in more areas of the country than ever before, which means brokers are never far away from the support they need to access a wide variety of products, including bridging finance.
My new role is working with our key account partners and educating them about our bridging proposition. My territory is London and the South East, including East Anglia, and I work with brokers in promoting how short-term lending can be a great solution to meeting their clients’ needs, both on a regulated and non-regulated basis.
I work closely with the key account team to identify opportunities, while also working with the BDM team to help them promote and provide education on bridging finance through their intermediary relationships.
Do you think the industry can do more to educate brokers on bridging finance?
We so often hear that lenders are London-centric and how bridging finance is focused mainly on London and the South East. However, bridging finance can help you wherever you are in the UK and I believe we can do more to make more brokers aware of this. Precise Mortgages’ team of BDMs works hard to spread this message by holding regular bridging finance workshops and training sessions in locations around the country.
What advice would you give to brokers who are new to the bridging finance market?
My advice to brokers regarding the bridging market would be to make sure you’re up to speed on the benefits of short-term finance. It’s a really flexible product and can be used in a wide variety of situations, whether that’s as a solution to a chain-break situation, as a way of quickly raising capital or obtaining the finance for a property that is not currently habitable. Take our refurbishment BTL offering, for example. Not only does it allow customers to access the short-term finance they need to refurbish a property and get it up to a lettable standard, it also gives them the peace of mind of an exit on to a long-term BTL mortgage once the work has been completed.
What do you expect will be the biggest challenge for the bridging market this year?
Most people talk about the economy being the biggest challenge, especially following Brexit. However, properties not selling and clients spotting new opportunities in the property market can drive more bridging finance business. With some rates now less than 0.5% per month, it could be a good time for clients to consider flexible short-term finance.
How did you get into the industry?
My first role in the mortgage industry was at Capital Home Loans (CHL), which I joined after completing my marketing degree. It was potluck to be honest; it was the first interview I went to and I thought it would do me good to get into finance in the long run. I joined CHL in 2006, pre-credit crunch, and what a different market it was then. I moved over to Fleet Mortgages in 2014, where I helped manage the marketing and telesales teams, before becoming a BDM. It was during that role that I learned a lot about the importance of face-to-face contact with intermediaries. I moved to Precise Mortgages in 2017 to expand my knowledge on the whole specialist market, and not just BTL.
If you didn’t work in finance, what would you be doing?
If I wasn’t working in finance, I would probably be a schoolteacher. I have two children and there’s nothing I enjoy more than encouraging and developing them. I’ll be coaching my six-year-old in his first team this year and I’m really looking forward to it. It will certainly be easier than when I used to coach/manage a men’s football team — organising and collecting the money off a group of 18- to 30-year-olds wasn’t easy!