BM Solutions

MOVING FORWARD TOGETHER
Phil Rickards
Head of BM Solutions
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
TODAY’S SESSION?
•
•
•
•
•
•
Market Overview & Outlook
View from a Landlord
A Move to Personal Affordability?
How to write better quality BTL
What to look out for – misuse!
What’s on the horizon?
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
THE MARKET
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
THE MORTGAGE MARKET
Gross Mortgage Lending
400
£billions
300
200
100
0
2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f
.
Source: CML and LBG forecasts
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
THE MORTGAGE MARKET
#theforum2014: Broker mortgage market share could hit
65% by Year End – Rickards
Mortgage Solutions | 09 Apr 2014 | 11:30
Intermediary v Relationship Market Shares
Intermediary
Relationship
Forecast
100%
80%
60%
40%
20%
0%
2007
2008
2009
2010
2011
2012
2013
2014
2015f 2016f 2017f 2018f
Source: CML and LBG forecasts
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
FURTHER GROWTH IN THE BTL MARKET
Secured Lending Market - Buy To Let
50
15%
Buy To Let Market - £bn
Forecast
40
10%
30
20
5%
10
0
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f
Buy To Let Market
Buy To Let share of Overall Market
Source: CML and LBG forecasts
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
WHY IS THIS HAPPENING?
•
•
•
•
•
•
•
FTB’s staying longer?
Changing attitude toward renting?
Shortage of housing supply, social and private?
More households created?
Unprecedented interest rate lows?
Unpredictable stock market returns?
Pension Reforms?
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
WHAT ARE LANDLORDS SAYING?
Only 4% of all landlords make a loss!
Less than 3 in 10 experienced a void and…
Rental arrears down to a 3 year low.
Landlord confidence at a 6 year high!
On average, tenants stay in a property
for 2.7 years
• 77% of Landlords view their
properties their as pension
•
•
•
•
•
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
Source: BDRC Continental Q1 Landlord Research
BMSOLUTIONS.CO.UK
I AM
A
LANDLORD!
ALL YOU NEED TO DRIVE YOUR BUSINESS
WHAT ARE LANDLORDS SAYING?
• 1 in 3 landlords intend to acquire property during 2015.
• 69% will do so with a BTL loan
• 7 in 10 landlords arranged their last
BTL mortgage through an intermediary
• For 1 In 3 landlords, their last mortgage
application was a remortgage.
• Increase in Let to Buy!
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
WE’VE PLAYED OUR PART!
There Through
The Good
Times And The
Bad!
2014 Delivered
Market Leading
Applications
2014
Completions
15% Up!
Lloyds Banking Group - BTL
15
25%
Forecast
LBG BTL - £bn
20%
10
15%
10%
5
5%
0
0%
2007
2008
2009
BM BTL
2010
2011
2012
Direct BTL
2013
2014 2015f 2016f 2017f 2018f
BTL as share of LBG overall
Source: LBG Actuals and forecasts
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
HOW TO WRITE BETTER QUALITY
BTL BUSINESS?
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
ALL NEED TO HAVE ONE EYE ON QUALITY!
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
APPLICATION JOURNEY
CREDIT DECISIONING
Mortgage Fraud Team
Mortgage application
submission made by
intermediary
Each application will be
screened by our
Fraud Platform
Underwriting Team
Intermediary
Processing teams
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
1
A MOVE TO PERSONAL AFFORDABILITY?
• Traditional rental assessments still stand but…..
• Personal income will be used in
decisioning strategies
• Affordable now and into the future
• Customers must be able to afford
personal commitments
• BTL rent is to support the BTL
lending, void periods and property management
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
A MOVE TO PERSONAL AFFORDABILITY
• Only declare income that can be fully evidenced
• Clearly demonstrate source or
sources of income
• We WILL request evidence of
income in some cases
• Retain evidence of income declared
on all cases
• Think MMR requirements and you
won’t go far wrong!
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
TO LEND OR NOT TO LEND?
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
HOW ELSE CAN YOU HELP?
• It’s amazing the mistakes some fraudsters will make!
• Quality of payslips?
• Net/gross income tying up with
bank statements?
• Consistent with employer type?
• Does the employer or self
employed business exist?
• Does the customer work at the
declared employer?
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
WHAT TO WATCH OUT FOR –
MISUSE!
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
SCHEME ABUSE – CASE STUDY
A Buy to Let purchase application was submitted to BM in December 2013.
The application was for a sole customer (41 years of age), Married with 1 dependent.
The customer declared £15,000 self employed income trading since 2008; the nature of
business was declared as ‘Property Management’.
The proposed Buy to Let security was a 6 bedroom property with an advised purchase price
of £1.07m.
The application advised that the deposit of £700,000 was being funded via a gift.
An interest only loan / 25 year term.
The customer’s current residential property was a 5 bedroom house worth approx £585,000.
The application stated that the customer was selling her residential property which was
currently on the market.
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
SCHEME ABUSE – ACTUAL PROPERTY
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
SCHEME ABUSE – ACTUAL PROPERTY
1.
2.
3.
4.
5.
Plausibility of case
Income – not sufficient for mainstream
Existing residential property value lower
than proposed BTL
Estate agent confirmed applicants are to
reside after completion
Repayment – Interest Only
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
WHATS ON THE HORIZON! (12-18 months)
•
•
•
•
•
Further BTL Controls?
Criteria enhancements?
Affordability in BTL?
EU Mortgage Credit Directive
A Share in further BTL Growth?
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS
THANK YOU…. A FEW CLOSING THOUGHTS
Approach a BTL Application with the same degree of
scrutiny as a regulated residential mortgage!
A small number of brokers are part of the problem, the
majority are part of the solution.
You have a key role to play in delivering
future application quality.
FOR THE USE OF MORTGAGE INTERMEDIARIES AND OTHER PROFESSIONALS ONLY
BMSOLUTIONS.CO.UK
ALL YOU NEED TO DRIVE YOUR BUSINESS