Mortgage Insider Podcasts | Barclays Intermediaries

Phil [00:00:02] Hello, Phil Spencer here. And this is Mortgage Insider from Barclays. The podcast series for mortgage brokers. I'm a property expert and part time TV presenter. And every month I'll be using my experience to get to the heart of the biggest issues in the industry. I'm going to be joined by industry leaders, brokers and Barclays own experts who will share their insight and expertise to help you navigate the challenges, changes and the opportunities in the property world. Now, in this episode, we're going to be looking at the concept of allyship within the wider diversity conversation and also what brokers can do to be good allies. Today I'm joined by Sidney Wager, who is head of intermediary market development at Barclays and also by Aleka Gutzmore an award-winning financial advisor and educator. Great to see you both. Thank you for coming. Let's kick off with a bit of an explainer, if you would. What is allyship? How do we how do we define it? How do we explain it?

Aleka [00:01:02] It's a big question.Yeah, it's a big question. But I think allyship is finding a cause that you care about, that you're passionate about, and that you're willing to put yourself forward and walk alongside another group or person to help them, whether that be mentoring.

Phil [00:01:22] When you say cause, what do you mean? Well, give us some examples.

Aleka [00:01:27] We see initiatives for women. We see initiatives for LGBTQ. We see disability. There's so many groups that are disadvantaged that we could, but we care about that. We can say, Right, I'm going to do something about that.

Phil [00:01:43] Sidney, anything to add on that?

Sidney [00:01:44] Yeah, absolutely. Bit to add. But because it's so big, it's not easily defined and often difficult to explain. If you look at some of the definitions, it talks about people that are aware of and use a privilege, often use a privilege to actively support others. And I think for me, it's probably even deeper than that in that I think you need to be curious enough to care. And if you're curious enough to care, you start to think about what can you do. How do you leverage your platform to support as Aleka says, it can come in a variety of guises that ranges from reverse mentoring to in order that you understand it, it's educating yourself. There are a number of resources that may be available for you to go and seek. Go and seek information, for example. But for me, it's about doing. It's about no longer being a bystander. It's no longer it's no longer sitting back and understanding that there may be an issue. Understand that there is a challenge around underrepresentation and what is it I can do about it to move that needle?

Phil [00:02:46] Do you think it's difficult for brokers who might be listening to this to recognise that many of them will be in a in a position of some advantage? Do you think they realise that?

Aleka [00:02:57] No, I think that's hard because, you know, it's not something that you're going out to look for. You've got your role, you've got your day to day, but it's doing a little bit extra. So as a broker, you'll meeting so many different people, you're in a position where you've got knowledge. So how do you leverage that? How do you use it to make things better, to get causes across?

Sidney [00:03:20] I think I think look, I think, again, privilege is a difficult thing to get others to understand because it's not as though it's something that's bestowed on you. It's more about the circumstance within which you find yourself. And that may have nothing to do with you, absolutely nothing to do with you. And I think sometimes I think privilege because the connotation of privileges you've been given an advantage in some way or another, and that's not necessarily what we're talking about here. This is saying that there are things that are just inherent with either the person you are, your socioeconomic group and parenting that affords you a privilege. And it comes in various guises. You can have socioeconomic privilege, financial privilege. It comes in various guises.

Phil [00:04:03] What kind of action do you think an ally could take of allies listening to this or wants to be an ally, whether the I'm a small independent or part of a large brokerage? What could and should they be doing?

Sidney [00:04:15] So I think there are two elements you ask about allyship in general. And the difference with me in terms of allyship is that I think it's a doing thing, right? It's an action. It's not sitting back, it's not recognising that there's an issue and hoping somebody else fixes it. It's about recognising there's an issue. And even if you don't recognise it, being curious enough to understand that there may be so, and then you take that and turn it into action, you do something with it, you, you sponsor, you work with those underrepresented groups. So you have to be doing. Otherwise it's just passive. And for me, that doesn't move the needle. And I think if we think about most industries, the ally grouping is probably the largest majority, often in decision making positions and often the influencers. Therefore, they have the ability to do more. But they need to recognise that.

Phil [00:05:08] So it's not a kind of one-off performance at all. It needs to be maintained, it needs to be consistent.

Aleka [00:05:14] Continuous yet definitely continuous. And I think a lot of allies don't necessarily recognise that they all have that at the time because it's just their natural being to help, to support. To understand, to be curious, to even ask somebody what is it that you want to achieve? What is it that you're doing and how can I help you with the resources that I've got? And that could look different for so many people. It could be financial support, it could be mentoring, it could be just a phone call to say, you're doing really well, keep going. So yeah, I think when you start using big, big words, allyship, partnership, people think, I can't do that from where I am, but everybody can be an ally to somebody else.

Phil [00:05:56] Okay. So sort of being, being being aware and getting involved and having those conversations, normalising those conversations, isn't it?

Sidney [00:06:04] Yeah, I'd agree with that. And normalising is a great, great way of phrasing it because wouldn't we all love a day that we don't need to do these podcast 100%?

Phil [00:06:15] They go. Yes. Yeah. Do not your organisations, do you think they have blindspots in terms of what they are or what they're not doing because they're not thinking about it?

Sidney [00:06:25] Yeah, look, and I think that again probably sits alongside things like privilege because what happens is you're unable to know what you don't know. Yeah. So, you're naturally going to have a blind spot. But I think when you talk about active allyship, you have a level of curiosity that means that you challenge yourself. You put a mirror up to yourself and organisationally you need to do the same. And I think most organisations, Barclay's included, have had to do that. We've had to put a mirror up and say, where are those blind spots? What do we need to do? And that's how we've evolved our DEI strategy going forward.

Phil [00:07:00] And are there people that you could call in to help.

Sidney [00:07:03] There are absolutely people you can call in to help. I think that there are plenty of people that I think have practiced and have been practitioners. So of course, you couldn't always help. But I think a lot of it starts from within your own organisation because actually there are plenty of answers and there are plenty of people. And I think, for example, one of the core strategies Barclays evolved was it was a build of our employee resource groups. Now that's about getting employees together of different characteristics and representative groups and coming together to start to inform the wider organisation to really give a voice to those levels of under-representation. And that's just one that's just one element.

Phil [00:07:43] Well, I know you've got a summit coming up, haven't you?

Sidney [00:07:46] Yeah, we do. We do. So again, that's just another opportunity to help move the dial. So the summit is very deliberately positioned as an educational plenary and awareness piece that gives brokers it gives all our partners an opportunity to have the conversations in a safe environment, having the conversations you probably would ordinarily have and probably have place in that too difficult to do box. So, it gives us an opportunity to have those conversations. It gives organisationally Barclays a chance to say, Listen, we are by no means getting this right. We are equally on a journey, but there may be things that we can share with others that makes a difference with them. And then we're also going to use it as an opportunity. And I'm glad I've got Aleka here with me, but give an opportunity to showcase those that are doing some phenomenal stuff because we talk about other people that can help. There are people already doing it.

Aleka [00:08:44] This is all about listening to the people you wouldn't normally. So the decision makers are usually the ones that in the standard stay in the agenda. But once you start bringing in local brokers, small businesses, then you're going to see a lot more of what people are doing. So, I think the small ones are more involved in community works.

Phil [00:09:04] Can you tell us a bit about the work that you do? Because I know you've got a number of roles.

Aleka [00:09:07] Yeah, I think so. I've actually a mortgage and protection advisor that is the title but inside that I've been advising for 20 years now. So, once you start to see clients regularly, you start to see patterns. You start to understand that there's a big difference across the spectrum of who you see. I could be seeing somebody who's on a low income but has got an aspiration to buy a property and on the otherhand I could see somebody who's earning 200,000 who has got loads of property. So, for me, there was a gap to be filled. Somebody coming in with a low income, they want to buy a house, but it's unaffordable. I could just say as an advisor, sorry, you can't afford that house and move on to the next one. But I saw that there was a gap to how do we bridge the gap? How do we educate these people? How do we help them rise up? And that could be a long walk. It could take a year. It could take two, three, four years to help them yet to work with them on a plan, keeping encouraging, keep checking back. It helps my retention as well, because you could see ten clients a week and I only get two applications. So, what happens with those eight? If you can be educating them, speaking to them, putting on events, just keeping the communication there, When they are finally ready, they're going to come back.

Phil [00:10:29] Yeah. You got the relationships

Aleka [00:10:29] Yeah.

Phil [00:10:30] And you've done some training programs specifically for women as well.

Aleka [00:10:34] Yeah. So I noticed my client bank was predominantly white male and I was confused. So, no matter how much advertising I did, I was like, where are the women? Where are the diversity here? What's going on? And I realised the women tend to need to be nurtured and cared for and get the information and allowed to make the decisions in their time. So, to generate leads as you would, I started to put on the afternoon teas where I choose a topic and I would use out of my knowledge that I've got to educate people in a fun and interactive way. So, it's relaxed, it's informative. They also get to network in that space. Those people get to spend two free hours with me. They get to hear my expertise and they're allowed to think of the information and how it attaches to them and make that decision to come forward and have the conversations.

Phil [00:11:30] So which is why you won the Trailblazer award?

Aleka [00:11:32] Apparently so, yeah. Which is quite nice to be recognised because I've been doing this since 2012 and I was probably one of the only. And why are you doing this? What's the benefit? It’s a lot of time it does take a lot of time and energy, but I believe that if you give people the knowledge and education, eventually they will make the right decisions. And being part of that journey.

Phil [00:11:57] Absolutely right.

Aleka [00:11:58] Yes. And now is a thing when I thought it wasn't something we were looking at or the industry were really focusing on.

Phil [00:12:07] We've had some great developments in the wider conversation about diversity and equity and inclusion. We've had MeToo, we've had Black Lives Matter. So, you know, people are far, far more aware of it. How can brokers ensure allyship is an ongoing part of their lives rather than rather than just a performance?

Sidney [00:12:27] So I think the answer to that is partially in Aleka's last response, right? Because the whole reason for this is, of course, there's a moral obligation to treat people fairly and equally. And of course, that's I wish we could all operate like that. And we probably haven't since the age of 3 or 4, because all sorts of bias and everything else layers on top in those formative years. But I think if you don't begin to recognise that you need to be able to serve the communities within which you operate, you will find yourself in a very difficult position because others that get this right, will take that space.

Phil [00:13:10] And you said about that, it makes it sound simple.

Phil [00:13:15] But it is, but it should be simple.

Aleka [00:13:16] It is simple

Sidney [00:13:17] It's simple and it is simple. And it's thematic and it’s difficult in its execution. And that's the challenge. Right. So, I think do brokers need to think about it? Yes. Do lenders need to think about it? Yes, we all need to think about it all the time, no matter how you look at it. If somebody is looking to join your firm or somebody is looking to invest in your firm or somebody is looking to spend money with your firm, they will look to see whether you share the same values such as they do. And if you don't. If I don't recognise people that look like me, if I don't see you share my value set, I'll choose to deselect. And it only takes that to happen more often than not. And you find yourself in a very difficult commercial place.

Phil [00:13:59] Really good point. Just finally, anything you'd like to add that would be key for brokers to take away or where they can learn more? They want to get involved.

Aleka [00:14:10] Be the change that you want to see. So, if you see a gap and something's not there, usually things are born out of frustration. So, if you see that there's a gap or this certain area or segment isn't being recognised or acknowledged, do something about it.

Phil [00:14:28] You need to care enough and if you care enough, you'll get on and do it.

Aleka [00:14:31] Yeah, yeah, yeah. And it doesn't have to be something big and enormous. These little steps lead to big change. So yeah, do something small, speak to that client that comes, comes in that you can't help with an application. Think, how can I help this person get there?

Phil [00:14:49] Yeah, yeah. Little steps as you as long as you moving forward.

Sidney [00:14:54] Danny completely, completely agree. I think every other person that makes a movement forward is another movement forward. So for me, and I think that that level of care and curiosity has to be the first point and the start point and then take the time to educate. Don't worry about getting things wrong, because if it comes from a good place, that's fine. But look at things that you can do. So read. There are films or books reverse mentor, get to understand what it feels like to work and be in and live in others shoes, for example. Each aggregation of all the steps will lead to a brand new pathway. Right?

Phil [00:15:35] Where can brokers go if they want to find out more?

Sidney [00:15:39] So again, interesting question. Look, there's lots of stuff external that you can find externally around what does it mean to be an ally? And we can put some pointers later. But equally, there are lots of organisations within our industry. So, if you think about the accrue network, if you think about Imler and Amy, all of these organisations are beginning to build resources to absolutely support brokers on that journey because I think we all acknowledge that it's a journey that everybody will be on a different path. So actually there's mentoring the sponsorship. As we've mentioned, there are so many different elements. I can imagine if you're sitting back here in all of this sort of thinking, where do I start? Do I start? Where do I start? And that's equally one of the reasons why at Barclays we built the summits program in order that we were able to start put in some flesh around the bone and given people, given brokers, especially an opportunity to start thinking about either where to start or how do I continue.

Phil [00:16:39] It's great you're doing those, the summit and the awards. And that's something that lots of people from all sorts of different organisations can come to and benefit from.

Aleka [00:16:48] Yeah. And I would also say if you're a broker and you're out there and you're thinking, I've seen this person doing something. These people are human. Don't be shy to reach out. Send them an email message and say, Look, I'm really interested in what you're doing. Can we have a conversation, a coffee, and you'll get some ideas, You'll get encouragement of how to start or what you can actually do yourself.

Phil [00:17:10] Yeah, because then they’re being ally and being your ally and then you can. Yeah, yeah.

Aleka [00:17:15] So it goes on is a ripple.

Phil [00:17:16] You mentioned reverse mentoring.

Sidney [00:17:17] Yeah.

Phil [00:17:18] Can you just expand on that?

Sidney [00:17:19] Yeah. So reverse mentoring is what would be perceived as traditional mentoring would be senior, probably a senior mentor who would mentor somebody that is probably in a less senior position and given them the wealth. And I'm talking in a in a work context. Yeah. So giving them the benefits and wealth of their knowledge and help and being used as a sounding board, etc.. Reverse mentoring flips it on its head, right? It flips it on its head because the mentor is probably the less senior so, is probably the less senior and more and invariably from an underrepresented group. So what then happens is if I take Barclays as an example, we have many underrepresented groups that will mentor directors, MDs and C-suite. So, actually what it then does, it gives you a completely different lens into the into a life and potentially a cultural characteristic that you've never seen. Whether that's whether that's around neurodiversity, ethnicity, gender, sexuality. It doesn't matter what those conversations and the way we've structured them is we insist that those relationships are ongoing. We like to make sure because it's like anything, you know, you can put a meeting in a diary that is overseen by something more important. We really insist on those meetings being kept and held. So, actually do start to understand what it feels like to be from an underrepresented group, given that it may not be something that you would necessarily have understood.

Phil [00:18:55] And it's not your fault that you didn't understand.

Sidney [00:18:57] Absolutely not.

Phil [00:18:57] You weren't you weren't aware of it, but.

Sidney [00:18:59] Which is the beauty. So, I talk often about finding a psychological safe space to have the kind of conversations that you need to have. Reverse mentoring affords you the opportunity to be able to sit down, ask questions of somebody, because both parties are in it for a good reason. And actually, I have seen those relationships work phenomenally well because actually, to your point, it's not about you don't know or you didn't want to know. It was just not on your radar. So, actually having the opportunity to sit down with somebody on a regular basis and actually understand what it feels like to be neurodiverse and what does that mean? What does that mean in terms of how you how you choose to receive information? How can I therefore start to change how I respond to you given that I know that and that just ripples across.

Phil [00:19:47] Can normalise conversation? And, and if you've got a blind spot, you don't know it. You used the term earlier on, you hold a mirror up to yourself.

Sidney [00:19:57] It's listen, it's not even just the mirror. We all have bias. Whether conscious or unconscious. So, for me, the key is always to understand that you need to understand that we all do. We will all have bias, we all have blind spots. But if you're curious enough to stop yourself and put the mirror up and ask to take a bit of an introspective look at yourself and say, you know, who am I and what do I think I stand for? It's tough. It's hard to do.

Phil [00:20:23] Yeah, if you're curious.

Aleka [00:20:25] Yeah, I was going to say, you've got to be willing to get bruised. You've got to be willing to be to get comfortable with being uncomfortable.

Phil [00:20:32] 100%.

Aleka [00:20:33] And move out of that that zone of I know it all and just listen. Listening is one of the biggest skills that you will actually need because you will learn so much more.

Phil [00:20:42] Really, really good advice. Great to talk to you. Very important topic to cover. And I'm really pleased and grateful that we did.

Aleka [00:20:48] Thank you.

Sidney [00:20:48] Thank you.

Phil [00:20:55] That was Aleka Gutzmore of Money Sprite and Sidney Wager from Barclays. And just to point out, we're recording this episode on the 30th of September. The views expressed by myself and external guests in this podcast are our opinions only and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a Fresh Air production for Barclays. Please do rate review and follow the podcast on Apple, Spotify or wherever you get your podcasts. Thanks for listening.

Phil [00:00:01] Hello, Phil Spencer here. And this is Mortgage Insider from Barclays. The podcast series for mortgage brokers. I'm a property expert and sometimes TV presenter. And every month I'll be using my experience to get to the heart of the biggest issues in the industry. I'm going to be joined by industry leaders, brokers and Barclays own experts who will share their insight and expertise to help you navigate the challenges, changes and opportunities in the world of property. Well, there's been a lot going on in the UK economy so far this year. Interest rates have been cut, inflation has cooled and of course, yes, there's a new government in place. Around the corner we have the autumn budget coming up and the election in the US. Something that's likely to have a knock on effect here in the UK to try and make sense of the economic outlook and help us understand what it means for brokers. I'm joined once again by an old friend of the show, Will Hobbs. Will is head of UK multi-asset wealth at Barclays Private Bank and Wealth Management. Will always great to chat to you and benefit from your. Your grasp of these very complex topics, but I think particularly good to talk to you today ahead of the budget, but already with a new government in situ and also with, low inflation and lower interest rates. But it's never quite that simple, is it? I wish it was. How are you, sir?

Will [00:01:28] Yes. Well, as you know me, Philip, I try to be glass half full, if at all possible, and I'd have to say I've been a contrary to the much worried about speech in the Rose garden. I would say the outlook for the UK is a little bit better than feared. And actually, as you know, last time we spoke, I was sounding perhaps unrealistically optimistic about the future. And actually some of that optimism is borne out. So we've had a very good first half in the UK economy. Things seem to have picked up a little bit. The UK is getting off the mat, and shaking. It's taking its head a little bit I think. And interest rates are coming down. Inflation is exiting right as we hoped for more or less. We're not out of the woods altogether. And yes, you know, this budget is going to be tough and may sort of slow that pace of growth a little bit. But again, that's reasons for optimism in the UK. And I think it is it is waking up a bit.

Phil [00:02:18] I mean, at the end of the day that we've got to appreciate the government is short of money. They've got to do something haven't they.

Will [00:02:26] Well, yes, to a degree, I mean I, I'm always wary of comparing my own or our own financial situation with the governments. When I borrow, there is a limit obviously, but in a way the, you know, and that should be for a government as well. But it's not knowable in the way that our own financial balance sheet limits are known. Governments have a monopoly on taxes, and these things are quite important when you lend to a government. But yes, I think the way that it is being framed at the moment is that politically, it's far better to get the bad news out the way at the start of your term, rather than when you're looking to get elected. So tax rises now feel like the right thing politically to do. The question of whether whether there's need to. Yes. What we can certainly say is that after, you know, since really to the middle of 2005, roughly, and certainly since the great financial crisis, there's been very little growth for the UK. And that's mostly down to a lack of productivity growth, which has been seen around much of the world. So it's not just a UK problem. The UK suffered a bit worse than others, but we can go into that and that has left public finances in a difficult space. It's left the services we rely on in a difficult place and some difficult trade offs to to manage. And so yes, there is certainly it is widely felt, a need to repair some of those, problems and as a result. But there's no easy taxes to do as we know, you know, anything you try and sort of pull out, whether it's pensions or CGT or all these kind of various bits. And the UK's tax take in terms of direct taxes is the highest it's been. I think in the post-war period, maybe even ever. Certainly on a sustained basis. So there's not that many kind of easy areas to go for and sort of plunder as such to repair the finances. But yes, we're going to see in a month.

Phil [00:04:27] What do you make? Given all of that as a kind of background, what do you make of the increase in public sector pay? That's that's been.

Will [00:04:35] Well, I mean, so the problem you've had, or one of the many problems you've had in the last few years is obviously this huge spike in inflation, which has given everyone, although it's very difficult to sort of feel, isn't that, you know, you get a huge real pay cut, a cut in terms of your spending power, what you can afford to buy down the shops, the public sector, again, because of that sort of post great financial crisis period where, you know, you saw pay freezes across the piece, you know, there's only so much the public sector in terms of wages can take in terms of real pay cuts over time. It's not an easy decision to make, I wouldn't say. And what you're finding at the moment, and the economy in general, is that real wages as an inflation adjusted wages are still growing quite briskly. Now, that, in a way, is something that the central bankers will be worrying about to a degree because they'll be saying, oh, if inflation adjusted wages are growing, maybe that's going to create more inflation down the line and more expectations of inflation. And, we've got to do something. But at the same time, it's also quite a positive force, because what that will be doing is helping consumers to feel and households to feel a bit more confident about the future, because in that quite positive first half for the UK economy, the consumers haven't actually played that larger role in it. And actually there is capacity for the consumers to do so, households to do so. In a sense, if you look at those real wages in aggregate, that's not universal. I'm not saying that everyone should get out and spend, but certainly because that real wage growth in aggregate, that suggests in aggregate, just like you're seeing in the US, there is room for the consumers to help drive the the economy in the second half a little bit. Yeah. Public sector wage as a part of that.

Phil [00:06:20] It is deeply complex isn't it. Deeply. Most variables.

Will [00:06:24] All these trade offs.

Phil [00:06:25] I don't want to get too political. But we have got the budget coming up end of October. What are your thoughts on what can be expected and how that might impact the economy?

Will [00:06:39] Who? It's quite difficult to be honest. There's no obvious area. So the interesting sort of conundrum within that point is that although your direct taxes is a proportion of GDP at the highest they've ever been on a sustained basis, your so-called sort of average owner has got the lowest direct taxes in 50 years. And so what they've tried to do is, you know, this idea of the last succession of governments, quite a lot of the tax burden increase was on large companies and wealthy individuals. So in a sense, there's not necessarily an easy win from just sort of saying, well, let's soak more out of the wealthiest parts of society and do that. You know, some people have talked about wealth, taxes. Evidence from international attempts show that it's quite difficult to do on a planned basis because at the very top end of the wealth distribution, the capital tends to be quite mobile, as we know. And if you give it enough warning that it can move jurisdictions, you know, so often you find that the revenue raised is less than anticipated. And the same is true of some of the other areas as well. In a way, like if you think about CGT, there's quite a lot talked about here, capital gains tax. But again, unlike incomes, people can delay decisions to sell something in order to not realise that gain. So again, you can get quite disappointing short term sort of revenue results from these things. So a lot of the sort of plausible discussions on what could happen in October hinge quite a lot on the need for reform. You know, why, you know, wider reform in some of those areas, like capital gains or how capital is taxed or, you know, pensions reform and these kind of things. So, you know, I'm always struck by how interlinked everything is and how difficult it is just to separate a little bit and say, oh, let's just go for that's you know, the reality is that the batch of governments that we've just had, it's not for want of trying to define in a way there's not an easy kind of, well, let's just launch this reform and suddenly, you know, there's going to be 20 billion under the bed. These are difficult discussions. And for me, I mean, the most important for medium term fiscal sustainability and debt sustainability, it's growth that's important. Now, this last 15 years, the overwhelming explanation, I think, for this last 15 years is one of the technological paradigm, you know, where you haven't seen material changes in that technological frontier. We've seen, you know, we've all got iPhones, but it hasn't necessarily yet made us more productive. And actually, what you're seeing now with this new batch of technologies, you are now seeing a plausible route to more sustained growth. Now, that makes your tax story, your fiscal sustainability, your services, all of that kind of thing just on a much easier footing than if you've got no growth. And therefore public services taxes becomes adversarial. So it may just be that this government is a little bit lucky in a way that they've come in at a moment where the prolonged hangover from the great financial crisis we've looked through back, you know, if you look through bank busts, through the history of time, they always come with a nasty long hangover of lower growth, low inflation, sometimes decades. So you're just waking up there and you've got this new technological paradigm to take advantage of. So you you could just stumble into a better growth right now. You can do some other things to help that for sure. And I think, you know, some of the advisors to Prime Minister Starmer, you know, they will be very much thinking along those lines about how can we, you know, the bits that we're doing. Well, how can we pour more resources, help kindle those flames as such?

Phil [00:10:22] Certainly interesting times. And of course, we've got interesting times around the world as well, particularly with but the US election coming up because presumably that will have quite large impact. So the results of it will impact globally, not just the UK.

Will [00:10:39] So Phil, yes, I think that's right. You know, I mean, the problem you have at the moment, it's more or less now has been a change in the odds, but it's now more or less a coin flip. And the problem you have in a way, is that you can think about all sorts of different constellations of House, Senate and Oval Office, and all of them have almost equal likelihood to a degree. So in terms of planning what comes next, it's difficult and it is consequential. However, I wouldn't want to exaggerate its consequence. Even the most media worthy presidents in the past have failed to be the prime movers of either the economy or the markets. And there's a reason for that, in a way, because are.

Phil [00:11:19] You talking about the US economy global.

Will [00:11:21] US and global, to be fair? I mean, most of the studies look at the US economy and the effects of different political paradigms and try and say, you know, what's there. And in fact, even if you look at lagged policy momentum, most of the answers and are not really because the prime mover. Of the US and global economy is again productivity growth. And those things are affected by governments. But it's more it's more indirect than we think. It's more about the reliability of institutions, certain cultural factors, the technological paradigm, those things sort of massively outweigh. And naturally, I think in democracies, you know, we want our vote to matter, don't we? And so we have this. We tell ourselves often this story of like, well, I put so-and-so in power, or my vote helped put so-and-so in power and the economy did that, and then someone else put them in power, and it went like that. And it's easy to try and tell yourself a story like that, but the data doesn't really back it up. In a way.

Phil [00:12:19] What I'm hearing from you, then, is that we should concentrate on what's happening in the UK, rather than worrying too much about us.

Will [00:12:27] Well, yes, and I think that's right, Phil. I mean, you know, I'm not sure how much it is actually as directly consequential in the way that we think of it. And actually, if we sort of want to think proportionately about what drives growth and focus much more on the technological sort of context and what can be done culturally and institutionally, but actually these things are much more boring on that as ever.

Phil [00:12:51] Well, I love talking to you because you put my mind at rest. I'll come to these things.

Will [00:12:56] Maybe mistakenly. Phil. Yes, maybe we should be watching this.

Phil [00:13:01] To the audience for the podcast is brokers. What would you say they should be keeping an eye on, looking at what kind of factors are going to be affecting their business?

Will [00:13:12] Yes. You know, obviously it's been a it's been a wild ride, hasn't hit the last few years in property. And I think the pandemic really looms large in all of that, doesn't it. You know, not just the giant spike in inflation, that sort of price spike that we saw as a result of all sorts of factors, but primarily oil and other prices spiking and the ripple of the energy price spike and how that ripple through these various economies. But really also is that idea that there was just we changed human beings, you know, our attitude to where we wanted to live, where we wanted to work, how much and where, when we wanted to work, and all those kind of things just dramatically shifted and perhaps shifted on to a new paradigm, a new sort of path. And that jarred up against with a housing sector where there is still not enough supply, and there certainly wasn't enough supply to take care of where people wanted to move to or how they wanted to change their lifestyle, set the sort of rental trends and all of those kind of things. So we're still living with that adjustment. Now you are saying inflation exit, right? We hope. Although, you know, I would repeat, I think what I said last year, which is the greater the confidence someone tells you where that's heading next, the less you should trust them. This is an area where stridency is a sign of ignorance, not wisdom. One of many areas, I would say, but that should mean that interest rates would continue to come down. Our suspicion is that they level out at a lower level, I mean, a higher level than they did in the last economic cycle. But that wouldn't be the end of the world. But that no, nothing wrong with that as long as, I mean, because in a way like these things, interest rates are both a symptom and a cause, aren't they? So what they're telling you a little bit is if real interest rates are a slightly higher level. One of the reasons why that might be the case is that growth is a bit faster, a bit brisker, and so there is simply more demand for all sorts of, uses for capital beyond saving. And that would be a good thing, I think, hopefully. But the housing side of things and the housing supply side, that's something that is, you know, well, it's a.

Phil [00:15:23] Real problem and that's not going to get fixed anytime soon.

Will [00:15:26] No, I mean, I was looking for your answer on that. To be honest.

Phil [00:15:29] There is so much talk with the new government about the numbers of houses that they're going to build and changes of planning systems and things, but actually to put that into practice is extraordinarily difficult.

Will [00:15:41] And the point is, you know, just reading about the attitude of sort of younger cohorts to want to buy a house, and that's the argument of quite a lot of that is influenced by some of the difficulties that you have, not just in renting, but how quickly you're able to evicted. But those things don't shift, you know, changing behaviours and attitudes towards wanting that ownership. You can't shift those very quickly. I'd imagine that would be my guess. You know, that these behaviours would shift over decades, not they.

Phil [00:16:08] And the costs of rent. It's it's extreme. Because there's, there's fewer rental properties to go round. And the net result of that is upward pressure on on rental prices. And when there isn't the housing supply.

Will [00:16:23] I'm in on that. Some would argue. I'm not sure the accuracy of this, but some would argue that you're still seeing lagged effect decades on, in a sense, from the attempts to cap rental prices and you deter would be landlords from coming in now. How long those effects linger for? I don't know, but it shows that in a way, like in order to incentivise people to come in and own and houses to let, it's complicated to them. And you can't just go directly to the source and say, well, cap rents.

Phil [00:16:52] I am worried about what it means for society longer term with with rents rising because there are fewer landlords around and the challenges of saving up for a deposit this time, you know, what does that mean in five years time? It's it's a it's a tough few people.

Will [00:17:09] No, no, you're you're totally right. And I don't have an easy answers. I mean, the only sort of, like, facile thing I could say is that you could make renting more attractive. But in order to do that, you need to increase rental supply. You need to change some of the nature of tenancy. You know, it's you know, it's these are not easy.

Phil [00:17:30] I'm afraid it's crystal ball time. Well, I kind of hate asking you this and putting you on the spot, but I also love to hear what you got to say. What do you see on the horizon? If we look ahead into 2025, what kind of things should we be thinking about?

Will [00:17:44] I feel, well, I mean, a lot is going to be defined by something. These aren't the sort of scaling laws that are in place with regards to large language models. So a lot of what happens in 2025 will be defined by how much further this technology can go. Does it stop at sort of being a relatively flaky A-level student in our back pocket, or does it go on to be sort of, you know, a Nobel Prize winning student in our back pocket? That will obviously be quite important in defining how the economy derives, productivity gains and so on. And there's quite a lot of other stuff going on in the technological space that will be incredibly important on that front. My personal view is that the outlook for next year is probably better than feared. I do feel like we're entering into this period where a load of new technologies are coming online, which have the potential to kind of revolutionise the workplace, the workforce and all of those things. But with these moments, if we look back through industrial revolutions throughout history, they come with a requirement for flexibility and in a way like that would be going back to our first discussion about the budget and so on. When you're going through an industrial revolution, your social safety net is unbelievably even more important, because if you think about it, jobs are being destroyed and created at different parts of the economy, but there's no requirement for that to be at the same time. And in a way, you need to be able to support your workforce and relaunch the individuals back into the right areas of the labour market and those kind of things. So there's a requirement for flexibility, but in a way you hope and this is the kind of article of faith that has existed over, you know, many centuries in the UK. We started it, but the UK in global economy is that, you know, if you can sort of maintain that dynamism, then the rewards are considerable in terms of living standards. Well, for all of those kind of things, a good example, just as an aside, and it's not that we should try and mimic the US. We can't. We're not the same kind of society and we don't have the same tolerance for dynamism, let's say. But during a pandemic, you've obviously got this unknown disease bearing down on you of unknown transmission, unknown fatality and everything. So all of these economies which are now really they're not manufacturing economies anymore that services face to face transactions. So the governments take the decision okay, lock it down. Everyone goes home. But US deals with it slightly differently. In Europe. What we do is does preserve labour market matches. So we keep employees attached to their companies where possible. The government gives the companies loads of money and sort of says, okay, we'll just keep things going on because, you know, we'll flood the system with capital, but we'll do it via the companies in the US. They do the opposite. So in a way they let unemployment rip and unemployment goes up. Topsy was 14, 15%. It goes up to what it went up to in the Great Depression, but in a matter of months, not years. And so it's this shocking thing. And I was looking at, oh my gosh, but they send cheques directly to the individuals. Now fast forward to today. And it what it seems like is that that unemployment rate has come down sharply in the US, but those people have rejoined the labour force in better fits for jobs, because what's happened during that time is companies have invested a huge amount and software part of that kind of work from home package. There's been a bit of a leap forward in the sort of digital and other technologies. And so your economy's moved on. And because of that sort of throw everything in the air dynamism that the US has got, the productivity trends in the US are a bit healthier. Now. That just shows you that kind of advantage you can get from dynamism. Like I'm saying, I'm not saying that Europe, Europe. Like I say, these things are sort of formed over millennia. You can't sort of suddenly say, oh, well, I want to be Japan.

Phil [00:21:33] It takes time.

Will [00:21:34] So. And second, where I want to be America, you are where you are, you know.

Phil [00:21:38] So, as usual, you've made me feel better about things because, I mean, I'm as guilty as anyone. I read the press and you think, oh my goodness me, what's happening in the world? Well, always going to talk to you just to settle this all down. Many many thanks. That was Will Hobbs, head of UK multi-asset wealth at Barclays Private Bank and Wealth Management. Now. The views expressed by myself and external guests in this podcast are all opinions only, and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts.

Phil [00:00:01] Hello, Phil Spencer here. And this is Mortgage Insider from Barclays. The podcast series for mortgage brokers. I'm a property expert and sometimes TV presenter. And every month I'll be using my experience to get to the heart of the biggest issues in the industry. I'm going to be joined by industry leaders, brokers and Barclays own experts who will share their insight and expertise to help you navigate the challenges, changes and opportunities in the world of property. Now, during a cost of living crisis, the additional cost of mortgage protection and life insurance may seem like an extra burden that homeowners demon non-essential expense. But arguably, some might say it's more important than ever. Around 2.5 million people in the UK aren't working due to long term sickness, added to which 1 in 2 of us will develop some form of cancer in our lifetimes. So how can intermediaries help prepare their clients for the worst case scenario, and how can they speak to them in a way that doesn't sound like a sales pitch? Well, to talk more about exactly that. I'm joined today by Barry Kellegher. He's a performance manager at Legal and General. Barry, if we can just start by talking about why people need to protect themselves and what are the reasons that they might consider taking out extra protection.

Barry [00:01:26] Okay. Well, it's probably worth looking at what the main types of protection are. So there's life insurance that pays out a lump sum if somebody dies as critical illness cover that does the same if somebody is ill. So that would normally be cancer, stroke, heart attack, those sort of things.

Phil [00:01:40] So that if they are ill so they can't work, it pays the.

Barry [00:01:44] Mortgage. Well that's not even dependent on not working. It's just dependent on having the illness. So for example we have lots of examples of where people have cancer. Breast cancer is a most notable one where people, if they catch them at the right time, they catch the illness. We pay them a lump sum. They can choose to do whatever they like where they don't have to pay the mortgage off. Right. And then then it's up to them. And if they go back and they get back to work, that's absolutely fine. Fine. And then the other way people sometimes protect themselves is with long term income protection plans. So these are things that either pay out or a replacement of income for a year, or anything up to retirement to cover the mortgage payments.

Phil [00:02:21] Okay. And when when is it a good idea to take it out? And I suppose importantly, when isn't it a good idea to take it out? Right.

Barry [00:02:28] Okay. Well, I suppose is a great time to take out when you have something worth protecting. Now, we might, a lot of the time be talking about the mortgage debt, but that's not the key driver that drives people to protect themselves and their families. The number one thing that protects people choose to protect themselves for it is their children, always their children. And then it's the mortgage debt. And then the other driver that often makes people decide that this is the time to sit down and talk about it is when they know somebody, know somebody who's been ill or been sick and it's, well, this might happen to me that it makes a little bit more real.

Phil [00:03:01] Yes. When you say that they're taking out for their children, so enabled to look after the children if they weren't around to do so.

Barry [00:03:09] Yeah. What you think you think about it if you just. It's very rare that anyone gets asked these sort of questions, is one of the great advantages of sitting down and talking to a really good adviser. What else to go? And you're just about to sit down and your wife says to you, no, no, actually, what I really like to do is talk about death. We talk about death and I and, you know. No, no, let's talk about what happens when we're really seriously ill. You don't have those conversations. People don't have them. I don't like having them. People don't like to talk about death is exactly the same reason people don't take out wills. You know, it's it's an.

Phil [00:03:40] Uncomfortable quite confronting.

Barry [00:03:41] Yeah. Absolutely. And then silly things go round the human head. Don't then go. What if it if I mention it, it might happen. Absolutely ridiculous. But that's human nature. And sitting down and maybe taking out a mortgage is one of the really rare occasions when someone takes a moment, sits back, has someone in front of a news professional and says, okay, what do you want to happen?

Phil [00:04:06] And those different types of protection. Can you wrap it all? Do people wrap them all into one, or do they they pick a do they pick life insurance or do they pick income protection like?

Barry [00:04:16] Great question that sadly they don't do enough of it.

Phil [00:04:18] Right.

Barry [00:04:19] You know what I would say that, you know, ever legally do. But but most commonly people go towards life insurance. Okay. And I use the word commonly, in an interesting way because actually, if you look at from our research, only about a third of adults have any form of life insurance cover, and then about 10% of people have any form of critical illness cover. And it's even less when you look at income protection.

Phil [00:04:44] Right.

Barry [00:04:45] So the alternative way I always I always look at that in an alternative way and say, well, nine out of ten people don't protect themselves with aerial. So what do they do? But how do they cope? How do they pay the mortgage? How does the child learn and grow up and get to meet the aspirations of the parent?

Phil [00:05:04] So how do you have these conversations? Because as you say, they are tricky and you have got products, they are costly and you don't want to be coming across as a salesperson. But actually it's important conversations to have. How do you advise brokers through that?

Barry [00:05:20] Well, I think the most, most beneficial thing I can say is your attitude, your mindset going into any single appointment with anybody in the freezer with you, because no one likes to sound salesy, no one likes being on the end of someone sounding salesy. So a phrase I'm very happy to share hmhm is seek to understand, not convince. And if you think about that for a moment, no one wants to be persuaded to do anything. What they really appreciate is someone sitting down. And I always think if they can have three skills, really any single advisor, the first one is, is to be authentic, to be truly authentic. And it's an overused word, authentic. But in other words, just show that you care and you can show you care by thinking about the person opposite you as if they're a family member. So anyone listening to this, if you think about the person you love most in the world. More than anyone. The person who's most important to you. And when you see them, you visualise them. What would you want to happen for them? What situation would you want them to be? How much time would you give them? The second thing I think everyone would benefit from showing is a level of understanding and empathy. So no judgement. Yeah. No persuasion again. Yeah. Just sitting down and going. Right. Okay. My opinion doesn't matter. Their devices. This is a hard. This is a hard step to say. It's say European, but actually it's not about yourself in someone else's shoes. It's about understanding what they would do in their situation, not what you would do given the same situation.

Phil [00:07:00] It's tough, though, isn't it? Because I would imagine you sit with a lot of people who probably just want you to tell them what to do.

Barry [00:07:06] Yeah, but the problem is people don't do what they're told, do they? I mean, everything from being a child to adult. As soon as somebody tells you to do something, you don't do it. People have to discover for themselves. Yes. Based on their own aspirations of what they want to achieve. You and I may both say, well, if anything will happen to us, we want to stay in our home. Okay. But the reason that I want my family to stay in my home, and the reason you want your family to stay in yours are completely different. Yeah. And it's getting to the customer and their language so you can bring it to life for them. And they can see and they can make the decision.

Phil [00:07:38] So it is there's no right or wrong. It's subjective. It's different. People in different situations make different choices.

Barry [00:07:44] Absolutely. And almost there is a problem with right and wrong. And people think there's rights and there's wrong.

Phil [00:07:49] Yes.

Barry [00:07:50] And I haven't met anyone yet, Phil who likes being wrong. If you haven't. No. Right. So I've met a soul who likes being wrong. So I just think there's a best thing you can do for somebodies individual circumstances. And they'll realise that if you have a great conversation with them. Yeah.

Phil [00:08:06] Do you sometimes receive calls from people who've had some emergency and they're bringing 2 to 1? Have they got cover?

Barry [00:08:14] Yeah. Yeah. It's quite sad, really. We get more than than we would like. I reckon there's, there's three calls that happen. If so let's just, let's take the scenario again of someone being seriously ill. And because so many of our claims are for cancer, let's let's think about cancer. There's the call you get to make, which is will you bring us up? You up our claim department, and you say, I've got a life and critical illness policy. I'm not. Well, I'd like to make a claim and often enough, it's the person who's claiming that makes that call themselves personally. And we go okay, brilliant. You've got it. And guess what we pay out. So what we do, that's our job. We pay out. But then these other calls we get where people who just took out life insurance ring us up in the hope that they've got critical illness cover. And we have to say I'm sorry, I have it very hard for someone to have to say that. And one of the questions we'll ask them is okay what did your advisors say to you about it. You know one of the common answers we get back. They didn't make it sound very important or worse still I didn't mention it. And then the final call, which they then probably have to make again themselves, is the call they make to Barclays or whoever their mortgage lender is, and they go, we can't pay them.

Phil [00:09:29] We can't pay the mortgage.

Barry [00:09:30] And I can't believe that is any person's single aspiration for themselves or their family. If they're real, I still do. You know, if anything happens to me, I'd like my family to really struggle. I'd like to be just great by not have anything. I tell you what, food banks, that's what I want. And they don't say that. They don't. They say they want them to have the world.

Phil [00:09:50] And I understand you have your own story about being on, on, on, on the sort of receiving end of illness and claims.

Barry [00:09:57] Yeah. Yeah. I do so you're sort of upset me feel it's this is this is a podcast. Do I look relatively fit and healthy?

Phil [00:10:05] You do indeed.

Barry [00:10:06] Got this. The nicest thing anyone said to me today. It's a little bit, look, I am, I'm fit, I'm healthy, I exercise, I eat well, all of the things you're meant to do.

Phil [00:10:16] And have you always on the.

Barry [00:10:17] Always. Yeah. I never smoked anything like that. But illness is indiscriminate. Yeah. And, and it was particularly indiscriminate for me, in fact, while I was in hospital. And I'll briefly share why in a moment. But while I was in hospital, I got fed up every day, a consultant to come in to me and say, you're exactly the sort of person this shouldn't happen to me. Which is no come from. No, no, no, no twitching away. But I was sat in August of last year, the 4th August last year. I was sat on my desk at home 1130 in the morning, bright sunny day, and I had a pain in my neck, in my head like no other. And, I thought it was a stroke. I was rolling around a bit. I get rushed to hospital and and they said, look, you're really fit. You've got low blood pressure, low heart rate as you what you meant to have. But sometimes those two things together cause stroke like symptoms. Something was, okay, I'll get by. They put me in a CT scanner and I wait with my wife. And, a consultant comes in and goes, well, sorry. Sorry. It wasn't what we thought it was. You've had a surprisingly brain haemorrhage, and, we're going to rush you, to to hospital in Romford. And really, the thing I'll share is the, the thing that I did next, or I said next. Well, my first word was bugger. I think like Hugh Grant in a 1990s rom com, but once I got over the shock, the, the genuinely. And it might be because I'm in the industry, but genuinely the first words I said to my wife who was now looking concerned was, this is where the life insurance policies are. This is where the fruitfulness policies are. This is who you need to contact. And. And why am I? I didn't really think much of it at the time. But on reflection. What I allow me to do is right there and then. I don't have to worry about money. I knew my family whatever happened, which because that was the point, I thought I might die, but whether I died or I stayed alive.

Phil [00:12:16] We're going to be okay.

Barry [00:12:17] They were always going to be okay. Yeah. And, and for me it meant that all of my focus could be on getting better. Yeah, but it didn't matter. They would be all right. And and if you think about what we said earlier. Only 10% of people could probably say that. I can't imagine what it would have been like to be in that hospital for that length of time.

Phil [00:12:38] How long were you in?

Barry [00:12:40] Well, about six weeks in the end. I think it was, four and one and two another.

Phil [00:12:45] And so if you if you had been in hospital without that level of cover, you would be stressing about. Everyone would be stressing about that as well as stressing about you and your health.

Barry [00:12:55] Yeah. Yeah. I mean, I really can't imagine what it's like to be in hospital. It's bad enough as it was, really. And lots of horrible things going in hospital and and they're unpleasant, I won't say certainly share them today, but, I can't imagine laying there thinking about how am I going to pay the bills, what are the people that I love most in the world going to do? Yeah. I mean, it's so comforting to know that something's there to to do it.

Phil [00:13:17] Well, Barry, it's good to see fit and well today. And out the other side and the family. All well. And the mortgage looked after.

Barry [00:13:22] Absolutely. Thank you.

Phil [00:13:23] What would you say brokers could learn from your experience?

Barry [00:13:28] There's lots of things. I think there's lots and lots of good people having lots and lots of great conversations. I just think there's. Treat people like humans. I like people to be straightforward. Find out what's really important to people and why they feel that way and what they'd want to happen. Somehow we live in a world sometimes where people are so attached to asking questions around what people have gotten, people tell you they'll cope, that you get by. We almost invite it. What have you got in place? How would you if you couldn't? People get asked a lot of salesy sort of questions. Pain. Pain is a strong motivator for lots of people, but it can also sound. Yeah, not the best conversation. Not the most friendly one to have. I think if we just sat down. And we asked people, I mean, if everyone on this call, you know, just listening. I went right, right down. We got a good old fashioned pen out and write down what you'd want to happen for you. Well, if you're family in your home, if you died.

Phil [00:14:29] Yeah.

Barry [00:14:30] And then the same if you were real. And then see if you've got anything in place that allows you to do that. Yeah. The the other thing is, and the most influential thing as to whether anybody protects themselves after talking to an adviser is, is the door they walk through. Phil.

Phil [00:14:49] What do you mean by that?

Barry [00:14:51] People get lost a little bit. Sometimes they think customers are making decisions and they make the same decisions. If they walked into their office, irrespective of the interaction they have with the adviser. And that's not true. So irrespective of what a customer is doing with a moving home or staying where they are, irrespective of their age, irrespective of their occupation, they walk through the door of one adviser room one less, call it and that adviser truly care sits down, seeks to understand what's going on in their world, what's important to him. And highlights any gap. Or another adviser should call it door to. And they walk in, and maybe that advisor cares a little less about protecting them for whatever reason, or really cares and just doesn't have the best conversation they could have. And that customer walks away unprotected. It's a bit like in our old film Sliding Doors. Yes, you walk in one and you walk out the other. A life looks very, very different. And I suppose to anyone listening, I'd ask one question, which is? Which door is yours?

Phil [00:15:57] It's tough, though, because it all comes at a cost. And, you know, things are tight at the moment and people are having to make these big decisions. I guess if there's one thing, you should ensure, it's yourself.

Barry [00:16:08] Yeah, well it's good. Hasn't happened yet. Yes. People find it very difficult to predict the future, which is, sometimes, sometimes when we talk to people, it's it's easier to try and bring it to life right now. Now for them. Yeah. Money is tight. Money is tight for a lot of people. And they're on the way here in a taxi. The, the taxi driver was saying to me completely by chance, because I'm just about to move home. I say, it's great. He said, my mortgages. Thanks. I said, what have you done to protect yourself? Knowing I was coming here, I said, what are you done to protect yourself? I do switch off occasionally. And. And he said, well, I might take out some life insurance. So a little conversation.

Phil [00:16:46] About you.

Barry [00:16:46] Had a little. Yeah. And whilst it is, how can you afford not to? You know, I talk to lots and lots of people. They spend months looking for their house.

Speaker 3 [00:16:58] And.

Barry [00:16:58] It's the perfect house. And you ask them why you're there. They'll say, it's got this, it's got a garden. It's safe for the kids. It's close to the school, or it allows me, you know, if you don't have any of those things, children or family. It allows you the independence to live how you want to live. So you do all of that. You spend a large amount each month to stay in it. Yeah. One simple thing similar to that happen to me. I mean that goes in the hobby.

Phil [00:17:23] Yeah.

Barry [00:17:24] You can't afford to look at moving into a home or even staying in a home. And not a fool to protect yourself because you've made yourself really very vulnerable to life's events. I mean, I wouldn't be surprised if there isn't everyone listening to this today. I'd be surprised if. If they don't know someone who's been ill.

Phil [00:17:45] And you get examples of situations of people who get on top of their mortgage, get control or, you know, get it, get it nice and low and then cancel their insurance. Does that happen?

Barry [00:17:58] Yes. So one of my critical illness policies that paid out to use as an example, was from an old mortgage. And when I, when I left the home, I was in for various reasons and found myself in a situation without, you know, renting for a while. It would have really easy for me to cancel that policy, but I saw the value to me because suddenly I'm on my own not needing to be independent. But as a consequence of talking about this and my story a little bit, the amount of people that have come up to me and said, I really should have, I shouldn't have cancelled it because this happened to me. Yeah. You know, you buy you buy life insurance premiums, critical illness policies, all of them. You buy them with your health. So you sit there healthy today knowing actually what I talk to legal and general legal, going to look at me in a fair way and give me a premium based on my level of health to make sure that whatever happens, I get to stay in my home. Yeah, the longer you leave that. The greater the risk that is. I. About a third of our critical list payments last year were in the first five years of taking a policy. Okay, so the average mortgage now is 30 years for first time buyers. Yes, it's 35 for.

Phil [00:19:11] A lot of. Yeah, it's getting longer.

Barry [00:19:13] That's a long time of trying to pay a mortgage.

Phil [00:19:16] Isn't it? And stay healthy.

Barry [00:19:18] Well. And stand. And is that enough? Yeah. You know, if you think, you know, how much of your monthly outgoings these days is actually the mortgage is some it will be higher than others, but it's a lot of other payments, isn't it? They've got to be made. Paying the mortgage off is rarely enough. It doesn't keep you in the home. No, it keeps you the home. It's paying the gas and the electricity and the council tax and everything else. It's gone up.

Phil [00:19:37] Yeah, yeah. I've often said it's not just the cost of the house, it's the cost of running the house and living in the house. And, it's a very fine balance for brokers to, to get right, though. I mean, how do you have these conversations? It's, it's it's delicate topics. It's important topics. You want to understand them but you also don't want to over, over, over sell or over pitch. How do you how do you advise brokers to tackle it?

Barry [00:20:00] Well, I always I always think feel that if you just if you, if you think there's a problem in your head with it, that's don't worry. That'll come out in your conversation. If you think it's difficult, it will come out in your conversation. It's how you pitch your job role. First of all, more than anything, why are you doing the job that you're doing? Why are you having this conversation? Is it to get someone a mortgage? Is that it? Or is it to make sure that you get someone in a home and whatever life brings, whatever happens if they die, if they're real or anything else, they get to stay in that home. And as soon as you say that, well, it's certainly as soon as I say it to me, my job role feels different. And instantly I'm going to try and seek to understand what that customer wants from life, what situation they find themselves in. It almost feels irresponsible to me giving someone a mortgage. And not letting them find a way to stay in that home will ever happen.

Phil [00:20:57] There are so many variables, and in order to advise a client correctly, you've got to understand all of them. And that's that's a deep relationship on on a tricky topic. So it really it sense is sensitive questions and understand it.

Barry [00:21:11] Yeah it is. But then you've got the word right there again you've got understanding. It is sensitive but always having your heart knowing that the customers don't have these conversations anywhere else.

Phil [00:21:31] Well, that was Barry Gallagher, who's a performance manager at Legal and General. And just to point out, we recorded this episode on the 22nd of November. The views expressed by myself and external guests in this podcast are opinions only and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Do please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts. Thanks for listening. 

Phil [00:00:01] Hello, Phil Spencer here. And this is Mortgage Insider from Barclays. The podcast series for mortgage brokers. I'm a property expert and sometime TV presenter, and every month I'll be using my experience to get to the heart of the biggest issues in the industry. I'm going to be joined by industry leaders, brokers and Barclays own experts who will share their insight and expertise to help you navigate the challenges, changes and opportunities in the world of property. It's been widely described as a revolution. Something more profound than fire or electricity. And it could, according to some. Spur a productivity boom across the global economy. Yes, you may have guessed it. We're talking about AI. So what do brokers need to know about AI and how it's going to change the way they do business? Well, I'm delighted to say that today I've been joined by Stuart Cheetham. Stuart is the CEO of Empowered Mortgages. There are regulated lender and MQB which is a mortgage technology business. Alongside him is Lilia Cristofori. Lilia is Microsoft's banking lead for Europe, the Middle East and Africa. And just to point out, we're recording this episode in April. Great to have you both with me. Thank you so much for coming on the pod. Let's start at the beginning. So, when we talk about AI or generative AI, what are we? What does it actually mean? And in a nutshell, how does it work? I mean, that's a very broad question to kick things off with, but let's just throw that one around for a bit. But what does it mean?

Lilia [00:01:40] I mean, I have been around since the 1950s, so it's it's really not something. So it's not, you know, it's not new. I think people confuse the difference between machine learning AI and generative AI. I think the biggest change that we've had in this world of technology is having large language models that we can actually interact with on a human basis, using our normal speech and language that we would with another human being, for example.

Phil [00:02:07] So is there a difference between AI and generative AI?

Lilia [00:02:09] Yeah. So AI is more algorithmic. It is more looking at interrogating data sets and, and mathematically sort of processing that in ways that would facilitate an outcome. Yeah. Generative AI use can use and extent be extended to using AI. But the top layer basically of the interaction is the natural language model. It's your communication.

Phil [00:02:35] So it's been around since the 50s and we've only just heard about it.

Stuart [00:02:39] It seems there's been some really big leaps though. So so yeah has been around for a long time. But then if we just look at the last sort of five years, 2018 ish was a big leap. This is when language models started to really be used. And and that was the cutting edge. And then, you know, now we have large language models, which is all, really about the scale, but this is open AI and ChatGPT and all this stuff, and, and these it should really be recognised that these are massive leaps in technology, not really understood, but they are massive leaps. And we were just talking about like just nine months ago. There has been a massive leap in the technology of what can actually happen now.

Phil [00:03:22] And more leaps to come, would you say?

Lilia [00:03:25] Absolutely. And I think unexpected, in fact, some things that we can't even predict or plan what might happen because.

Phil [00:03:32] Whether I should be nervous or excited.

Stuart [00:03:34] Both is exactly what it should be. But it's all about educating people to understand what's coming and how we can, because it's not going to be that. I mean, driverless cars. A really good example of I am so is can you have your car drive you from A to B without a human being today? Absolutely, yes. Will that actually be allowed in real life? Probably not for quite a long time because there's a risk associated with it. So your hands are on your wheel, your eyes are on the road and it can tell you doing those things. So I will come in, but it will be limits and there will be controls, particularly in a regulated world. Yeah. You're about to talk about. Yeah. Those controls are very much there.

Phil [00:04:12] Okay.

Lilia [00:04:13] And I think a lot is reliant on cultural adoption. And countries, some countries will adopt it faster than others. And I think that's what's going to maybe push the proliferation worldwide and kind of push the regulation also worldwide.

Phil [00:04:26] Got it. Lily, how would you say the banking industry is coping with the adoption of AI? And I'm thinking about the challenges of regulation particularly.

Lilia [00:04:35] Yeah. So internally, in terms of the use of the employees within the banks, they are using AI for product productivity gains and, you know, redesigning internal processes. Investment banking is a big area trade, you know, payments. They are using these kinds of tools, I think, when it comes to externally facing use of AI directly in contact with customers, rather than, for example, facilitating insights while in a conversation. So for a branch staff member or a contact centre staff member to have something augmented on the side while they're having the conversation. Yes, that, but not directly to the customer. Okay, so there is a bit of, a challenge with regards to the risk appetite around that engagement. And, you know, maybe there is an apprehension around when things could go wrong in terms of that conversation. So the first stress test really for banks is to have that internally, facilitated and always be as a co-pilot rather than the, the pilot.

Phil [00:05:40] It's an exciting time. It really is. But yeah, as you say, the next leaps are going to be big and they're coming. Whether we I'm.

Stuart [00:05:46] I'm for the banks. Part of their adoption challenge is they got legacy platforms that have been around for many, many years and trying to plug AI into these things. It's really difficult. Think about taking a little mini, taken out the engine and put a Formula One engine in it. Yeah, it doesn't work. And these, banks are going to have to replatform and re plug in these things. This is what's stopping a lot of the adoption coming through. And but that as they start to replatform, as they start to create greater flexibility in their core infrastructure. Technology. Yeah, they will have absolutely a lens on how do I make sure this is future proofed. I ready? Yeah. I'll be plugging this in.

Phil [00:06:27] So it's kind of step by step isn't it. What you're what I'm picking up is the capacity of AI is way, way beyond what we can actually cope with at the moment.

Lilia [00:06:36] There is two aspects to it. One is cultural adoption and a level of feeling like you're able to cater for that kind of technology in your day to day work. So that's that first apprehension that anyone, anywhere would have. And then the second to your point is data silos. Yeah. So we as a Microsoft have invested a lot in a product called my, fabric, which allows us to be able to virtualise a lot of that data that you can put the generated generative AI on top of. And this is supercritical technology. Otherwise, the banks would really struggle for years trying to get the data state in order in order to allow for this technology to be available.

Phil [00:07:14] As fast moving. It really is, but it's exciting. It's true. How is it changing the world of broking at the moment?

Stuart [00:07:22] Well, I mean, it's definitely starting to have an impact. Behind the scenes. I mean, if if you look at what we do, I mean, we are an AI lender. It's kind of, strap lying around that. What does that mean? When I set this business up five years ago, the dream was, a mortgage broker should be able to get a mortgage offer as fast as they would typically buy car insurance, and we can do that now. So two weeks ago, a mortgage broker started an application form, 15 minutes, 37 seconds later, they got their full offer. That's the whole application form. The entire journey going that place. And that can't be done without I know.

Phil [00:08:01] That's that's. That's incredible. 15 minutes.

Stuart [00:08:04] Started. 37 seconds.

Phil [00:08:05] I've. I forgive 37 seconds, but but can I give advice?

Stuart [00:08:13] So too. So today. So could. You use gen AI to use advise? Ultimately, absolutely, yes. Would you want it to? Would consumers want it? This question marks around this. I don't really see people doing that, you know, at scale today. So the problem is with AI, everybody now sort of thinks this this cybernetics. I think does everything push a button and everything happens and it really doesn't work like that. Underneath the bonnet, it's doing very precise tasks or actions and causing outcomes to happen, which will get related to a conflict. So underneath the bonnet, far, far more complex like that. So if you look at how we use so we've used AI in a live regulated environment for over three years now. But it's doing very, very precise things in a very, very controlled way. And so, so it's just it's not an all encompassing thing. And you have to understand how it can impact, the.

Phil [00:09:12] Market on behalf of brokers particularly. I mean, I can understand how I can help massively with process and decisions, but I struggle to see how it will help with advice in someone's unique set of circumstances.

Stuart [00:09:26] So if you think about advice, so let's just break that down into some constituent parts and say in an advice journey, there's 100 questions. I make a number up just to make my mouse a little bit. So immediately when you look to digitise that type of process, you can probably think of maybe 5 to 6 of those questions are just going to be answered by data. Yeah. What's your credit score? What's your expenditure. What's your income. And actually most of that can be collated now and put into a decision engine. And then there's going to be these kind of softer facts like what's your attitude to risk. Do you have children. What are the age of your children. How to digitise. What's your health? Are you going to inherit all of these things? Become questions. Now think about this. The data source for that to be analysed. Now the one of the biggest changes is the fact that we're now able to listen to read live chats or listen to phone calls. And I will just be able to consume all that immediately. So if you just pump in the last three years worth of phone calls or live chats, it will start to load and it will start to generate a confidence score against. So this person has asked, what is your health? How do you feel all these derivatives of the same points? But it will start to collate all these things and you start to get a confidence call coming out of these things, which will be measurable through those points. And then you can get to a risk appetite of whether I'm willing to allow this machine to answer these questions. So, you know, again, underneath the bonnet here, there's lots and lots of little actions going on here, all of which can be monitored to a degree. In the regulated world, they will have to be monitored. Genuine black box stuff will be difficult to execute with regulators. So we take a very distinct approach to that and things like that. So again you have to think about what it's trying to do. Now if at the end of the day the consumer goes, you know, what do you think I should buy my house? Yeah. That is actually something they really want a machine to answer. No. And that is a question I bet most brokers get asked on almost every single transaction. And that's a point where actually, you know, the consumer really wants them to tell them an honest opinion, and they really want that to be a human being.

Phil [00:11:31] I couldn't agree more.

Stuart [00:11:32] So it's about what is automated advice. Can it be done largely, yes. Will it be done largely, yes. But is it funny? Probably not.

Phil [00:11:41] And also very much hinges on the relationship they have with the broker and the trust that they have in that individual.

Stuart [00:11:48] Yeah. And I think it comes back to behaviours. Some people want to transact completely digitally and they don't want to speak to anyone. That's a remortgage. I've done it five times, I can I know where Chief Right is.

Phil [00:11:58] I know what you want.

Stuart [00:11:59] Why do I have to speak to somebody and that's fine. Choice is a good thing. Consumer choice is a good thing. We should, embrace that. But, you know, right now, when interest rates are moving so fast, do consumers really understand that movement of interest rate? So do they really understand what they want? And should they go to a broker to check they're getting the best deal? My view they probably should be. I think that.

Phil [00:12:20] We're more now than ever.

Stuart [00:12:21] More now than absolutely ever. And so and then it becomes okay, what reassurance do I really want. And how do you derive that through AI or not?

Phil [00:12:30] Can you talk a little bit about what Microsoft are doing and tools that brokers might be able to access or should be accessing?

Lilia [00:12:37] Yeah, I think look, there's the standard things that come out of the box in terms of first party. They go ahead and utilise some of the premium licenses that we have in terms of summarisation of email content, recreation of email responses, marketing, and targeting, certain campaigns and so on. A lot of this, even the generation of the advertising material, etc. can be done utilising AI. However, if you look at the whole lending process, we are very involved in all the banks in terms of expanding the capabilities that support it. So when we look at, you know. AML fraud for financial crime behaviours of customers in terms of their spend and whether that has changed in any way and it may, you know, impact the credit risk score or the financial standing. A lot of that, is supplemented using AI algorithms, from a generative AI point of view. We actually feel that the interaction, especially in the insurance part where we talk about a lot about underwriting the the contracts and the risk associated to those we are able to extract through digital conversations a lot more information that can tangentially then be used within those risk algorithms to see, the, the exposure that the organisation would have by taking on those contracts. And people or more customers are more or less reluctant to actually give that information. And also, we noticed from a broker perspective, one of the things that banks are concerned about is are we asking all the questions? Are we asking the questions in order to get the mortgage through? And so in, I would not discriminate around the questions that get asked, as part of that process and that collection. And therefore the likelihood on the risk calculation would be more accurate. So these are things that need to be considered.

Phil [00:14:25] So it sounds like, in terms of the brokers, that it will improve the offering, but also to improve their workflow.

Lilia [00:14:34] I think that if they use the tools and they work with the banks or with fintechs to enhance their operations, they absolutely will be able to do a lot more and even build on top of their current customer relations, to deepen them.

Phil [00:14:48] So maybe I shouldn't be quite so apprehensive. Stuart, just looking to the future, you know, five, ten years. How do you see that? The role of the broker changing given all these technology, technological advances?

Stuart [00:15:02] Yeah. So, for sure the the role definitely change, you know, but but then I can't really think of many roles that aren't.

Phil [00:15:07] Going to change. The world will be changing. Yeah.

Stuart [00:15:09] And the these big leaps within AI, I'm going to have an impact. But I mean, I think there's still fundamentals here, you know, that. Do consumers want reassurance and always still people people who want to interact? I still think that's always absolutely yes. So brokers will still want people to come to them, and they will still have to be a reassuring process. And there will be something around, building those relationships that always exist, you know? Certainly not. I won't be going, you know, a lifetime, I don't think. But underneath the bonnet, what they actually physically do, they will be getting their mortgage offers in 15 minutes. So this process of waiting four weeks, making 16 phone calls to lenders to chase all this, all this is going to disappear. So the very fundamental type of the role is going to change in this process. They're going to have their phones all going to be pre-computed in this process, and they're going to be presented with lots of those things. So the the role they will do will radically change in the next 5 or 10 years. But will people still be talking to people to give them reassurance?

Phil [00:16:14] And I think so. So. And from both of you, how do you suggest that brokers get ahead of these changes? Because it's just they're coming. What can brokers do best, do you think, in their world and in their businesses to, to, to to be prepared and to get ahead.

Stuart [00:16:29] So there's there's tools out there. So we offer tools AI tools to brokers right now. So right now there's we have a tool called Marketing Assist. And you can go on there and it uses large language models. And you can create your own blog or your own letters and things like this. And we use a challenger model where we use different, large language models. So it looks at creates content and then checks it from a regulatory view. So therefore they get greater confidence that it's kind of suitable and reasonable. There's at all we're giving to brokers to read bank statements to extract all the documents or the, all the expenditure items, and it pre completes that fact part and things like that. So this so that typically takes a broker. We understand 30 to 40 minutes every single case. And with our tool that take 2 or 3 minutes. Yeah. So there's things like this that are going to come to the marketplace through, lenders like empowered mortgages or the bigger lenders. And they, they should start to embrace this in their workflows and, and get used to those.

Phil [00:17:25] Things, efficiency and improvement.

Lilia [00:17:28] I think experimentation is absolutely there. I think everyone is trying Bing search and doing different things and know trying to dabble. But I think the important thing for adoption and actually changing process, to your point is you have to look at it as part of your workflow. Which parts of that workflow are you going to start interjecting those kinds of tools in, in, and how are you going to replace that process in order to, to do it at scale and with your team? Because there needs to be a level also of standardisation. You have different customers calling in to the same company having a different experience. We're going back a couple of years, right.

Phil [00:18:05] One final question, if I may. Do brokers have anything to be concerned about? Will I enable bank? To, interact directly with the customers. Is that something that brokers should be mindful of?

Stuart [00:18:20] So I think broker brokers for new lending in this country, about 85% of new lending goes through a mortgage broker. So that's probably a record time high. You go back in time, it's normally around 60% if there is such thing as an average. And brokers are in a and it's a variety of different reasons in that. Is that likely to come down? Yes, absolutely. Will I enable, lenders to create better digital journeys? Yes. And powered mortgages is building better journeys for brokers. Right now. Will will they do it direct? Inevitably that's going to happen as well. Will. But I.

Phil [00:18:59] Guess the individuals will still need the advice.

Stuart [00:19:01] And the one thing the banks really, really are nervous about is giving advice. And there's, there's good reasons for, that. And therefore, if we believe advice should exist within the mortgage world, I think it does. People typically don't understand mortgages very well, and they definitely don't understand interest rates very well. So I think advice still will be there. It will be then. To what extent does that get automated? So should brokers be, concerned? I think with any technology change, the world needs to be educated and it needs to adapt. People who embrace it, who want to learn about it, we'll see opportunity, people that don't, we'll see disruption and challenge. And but that's nothing new. That's been going on since, you know, the Industrial revolution.

Lilia [00:19:47] I mean, I would add that if you understand your customer holistically and that customer has, private account savings, you know, and so on, and then on top of that mortgage, then, you know, there is a risk because the bank will understand that customer more wholly. Right. However, I haven't seen that yet come about. And I think everything has got to do with pace. So if the bank is able to offer a better rate for a loan or is able to, you know, and hyper personalised that offer in a way that the customer's expecting and do it in a faster way, then there's a risk. That's why I think adoption and thinking about how to change the business model now is super vital for brokers. If they can get onto those journeys and continue to work with the banks and actually create almost like communities, and influence the way the bank would build those capabilities and service those capabilities to brokers without having to increase the footprint of the FTE headcount of the bank, then it's beneficial for both parties and also for the customer.

Stuart [00:20:48] There's a super cynical nature out there. Brokers, I mean, brokers have been promised technology for many, many, many years, and it really hasn't happened. And there's lots of reasons for that behind the scenes. And we have a rule in my business, if the brokers don't say it works, it doesn't work. And until the till the it's a bit like your your app or whatever until you actually think it changes your behaviour, you haven't actually built it, right. It's not for them to say, you know, it's for us to be able to build it for them now. And there's a super cynical nature. We've been promising this tech. It's always been coming. It's never been coming up. Hurdle this story before. And they're right 100% be right. The problem is, is almost the mortgage market. It's going to leap a couple of stages of technology and where real API integrations and basic stuff like this really hasn't had a massive impact on the marketplace. It's going to leap all the way into gen AI, and that change is going to be much bigger and much starker in reality of it. But it will it happen? Absolutely. I mean, it is happening now. Ten days ago, we did a mortgage start to finish in 15 minutes and 37 seconds. And we literally do that on a daily basis now. So this is just going to become more and more prevalent. So but there's a people listening to this right now. We're going to have heard this before. They would all that sort of stuff. And and they're right. But it is it's true.

Phil [00:22:07] How how about brokers who operate on their own. You know, if they don't have sort of big corporate support behind them, how can they get ahead and educate themselves, would you say?

Stuart [00:22:18] Yeah, I think what I would encourage people to do is actually go and seek, just basic understanding of what large language models are, what gen AI does play around to ChatGPT for. It's so simple to use and things like this. And actually what you do, you just become more accustomed and more useful, to this, type of technology.

Phil [00:22:39] If people are feeling a bit resistant, then it's sort of little steps, baby steps going.

Stuart [00:22:45] Oh, they really resist. And I mean, because every time you get in your car, AI is all over that car and it's helping you drive it. You just.

Lilia [00:22:52] Spotify.

Stuart [00:22:53] You just don't.

Lilia [00:22:53] Controlling your music.

Stuart [00:22:55] Absolutely. Every time you on Amazon it's telling you what next to buy. So the reality is is AI is all over the place. Yeah. What you're going to see that the big leap that's going to happen is around the content and the usage of that content. And this is what the, the open AI type bodies are doing. So therefore we're able to listen, I, I was listening listening to your voice and it can. Come back to you like it's your voice. This is the big leap that's coming. But otherwise, everybody's using AI. Every single point of the day. And they they shouldn't need to know about it. Again, not because it's secretive.

Phil [00:23:31] Yeah.

Stuart [00:23:32] That's just good user experience.

Phil [00:23:34] Understood. Thank you both so much. A really, really interesting talk. What a topic. Fascinating.

Lilia [00:23:41] Thank you.

Stuart [00:23:42] Thanks so much.

Phil [00:23:44] That was Stuart Cheatham, CEO of MQ and Empowered Mortgages, and Lillia Christoff, who is Microsoft banking lead for Europe, the Middle East and Africa. The views expressed by myself and external guests in this podcast are our opinions only, and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Do please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts. Thanks for listening.

Phil [00:00:02] Hello Phil Spencer here. Welcome to Mortgage Insider from Barclays, the podcast series for mortgage brokers. I'm a property expert and TV presenter, and every month I'll use my experience to get to the heart of the biggest issues in the industry. Along the way, I'm going to be joined by industry leaders, brokers and some of Barclays own experts who will be sharing their insight and expertise to help you navigate the challenges, changes and opportunities in the property world. In this episode, we're going to be finding out more about a growing area of the mortgage market green mortgages. We'll be learning more about what they are, how they work, and of course, what brokers need to know about them. And to do that, I'm joined by Kieran Campbell, head of sustainability and customer experience at London and Country Mortgages. And also Rachael Hunniset, who is an associate director at the Green Finance Institute and a former mortgage broker. And just to point out, we are recording this episode during the month of April. Rachel, tell us about the the GFI, the Green Finance Institute.

Rachael [00:01:15] The GFI was founded in 2019 with seed funded by government, with a blend of philanthropic capital as well. We're all either ex bankers or finance professionals, united by our mission to mobilise capital into net zero outcomes.

Phil [00:01:28] So what is a green mortgage? Can you just explain how what it is? How does it work? Who can get one? Give us the give us the background.

Kieran [00:01:36] So green mortgages are still relatively nascent in the market. In fact, it was Barclays who trailblazing the way with the first green mortgage¹. Which is really paved the way for other market entrants. The market looks now quite different to how it did in the early days, and there's still quite a lot of exciting innovation to come. And I think that's important to remember that we really are on sort of rung 1 or 2 of a very long ladder.

Phil [00:01:54] Of.

Kieran [00:01:54] Innovation. 2018 was the first green light to come to the market.

Phil [00:01:58] And they look very different now.

Kieran [00:01:59] Yeah, but there's this evolution. So starting out with really four categories. So starting out with products that be a discount. So you cash back traditional borrowing products and product related incentives, criteria based incentives, things like enhanced affordability. If you're buying an energy efficient home, things that integrate solutions as part of the mortgage journey. So that would be getting a whole home survey done at the time of remortgage application or when a standard valuation would happen. That sets out a path to improving the home, to make it more energy efficient, and then connecting that with finance products that sit alongside that. And then the fourth category being holistic and educational tools that underpin all of that and a lot of lenders, we've seen huge uptick in that over recent months and years of more lenders being able to be a source of information for homeowners to find out how to how to improve the energy efficiency of their home².

Phil [00:02:47] Kieran, anything to add to that?

Speaker 3 [00:02:49] So green mortgages, essentially, they offer an additional incentive for people who are buying homes to buy more energy efficient, properties. It depends on the lender's criteria, but they're normally EPC rated A or B, or possibly sometimes C as well. But also energy efficiency improvements can be quite expensive to most people.

Phil [00:03:10] As in retrofitting them.

Rachael [00:03:11] Retrofitting them. Yeah, exactly. So like double glazing, solar panels, loft insulation, all those kind of things can be the cost of it can be a barrier to people putting it into their homes. And so lenders have got a really important, role to play in that with green mortgages, because through them they can make those changes much more accessible to a lot of homeowners in the UK.

Phil [00:03:36] I'm not quite following. So. So if you buy a new home, you can get a green mortgage.

Rachael [00:03:39] Yep.

Phil [00:03:41] And but if you own an old home. Yeah. And you want to retrofit your solar panels or your heat pumps and that kind of thing, at what point would you ask for a green mortgage?

Rachael [00:03:51] You can ask at any time. So when you're buying the property or when you're remortgaging the property, okay. And green mortgages³, that can be for several different types. So for example, some of them could be cashback others are discounted rates.

Phil [00:04:04] So cash back if you wanted cash to put your.

Rachael [00:04:06] Yeah. Normally those cash backs are quite small amounts aren't they. that we see on the market. So sometimes up to 2000 but generally they're, they're in the hundreds. So I think green mortgages got a huge part to play, with UK homeowners in terms of improving the, the housing stock. So energy efficiency improvements can be incredibly expensive and a green mortgage through discounted rates or any of the products that Rachel has mentioned can give access to lower cost capital, for for homeowners to actually fund these for these improvements, and improve the EPC racing of their property.

Phil [00:04:47] Am I right? I seem to remember reading that the housing stock in the UK is some of the luckiest and most inefficient housing stock, certainly in Europe and other parts of the world⁴. Would that be right? Would that.

Rachael [00:04:58] Be fair? Yeah, absolutely. So green mortgages have got that really important part to play in the decarbonisation of homes, because the majority of that are homes in the UK a need to be retrofitted⁵. Yeah. Whether it be through loft insulation, solar panels, or anything else really. Green mortgages will give us access to the capital to be able to fund those improvements.

Phil [00:05:21] Can I just ask, when you when you mentioned decarbonisation of our homes, what are you actually referring to? What does that mean on the ground?

Rachael [00:05:28] So it's reducing the carbon emissions, from our homes to ideally zero, as possible or as low as possible, and then offsetting the rest.

Phil [00:05:38] And therefore or in so doing, making it cheaper and more cost effective to live in and better for the environment.

Rachael [00:05:44] Yeah, exactly.

Phil [00:05:45] So they're all winners.

Kieran [00:05:46] Important moments for brokers. They probably hear a lot of different phrases around this, whether it's retrofitting climate ready homes, net zero homes. And when we talk about it generically in terms of lending, just to keep it really simple, we're just connecting customers with the finance they need to achieve their ambitions, whether that be flood resiliency measures, overheating measures, a heat source heat pump. Yeah. Cavity wall insulation, solar panels on the roof. But. Kind of tech agnostic. We're talking about the finance element here of connecting those customers with, well.

Phil [00:06:14] Let's let's talk about the finance. How does it work? Who's actually funding these little subsidies. He's he's he's behind the green mortgage.

Kieran [00:06:21] So at the moment, most of the basis point discounts and cashbacks we've been given are being given off of lender's balance sheet. And that's because I recognise the opportunity here. And and they really are I think they deserve a lot of credit for the work they're doing to stimulate this market very early. And but we have a long a long road ahead.

Phil [00:06:38] Yeah. So Green Mortgage is here to stay. It's a good thing. But they are evolving quite rapidly.

Rachael [00:06:43] Yeah, definitely. And they need to evolve as well. I think with different challenges that are happening in the UK, we're starting to see heating events in the summer going to 40 degrees⁶. Flood risks are significantly higher⁷. And so actually retrofitting our homes are becoming even more important is becoming quite an urgent matter as well. For UK households.

Phil [00:07:01] It's that demand out there. Is it popular?

Rachael [00:07:05] So what we're seeing is less than 5% of all mortgage applications, all green mortgages. And the majority of those, nearly half are, buy select properties. So the demand is there, but it's unlike the smaller scale things.

Phil [00:07:22] Would you say that there is interest out there?

Rachael [00:07:24] I think there is interest. I think, as Rachel mentioned, education is a really big part of green mortgages. So for example, travelling here today, I saw a friend and he asks, well, his first impression of what Green Mortgage was it was more about the bank that is lending to you. Oh, is the bank green? Is that why it's called a green mortgage? So actually there's a huge education piece there. And also people don't know that green mortgages exist in general. I think because the rates of green mortgages aren't as competitive as they could be because it's you know, I think the demand needs to increase is that, people look at rates tables and they may not appear. So it's something that customers have to know that exist and therefore have to ask their brokers or their lenders.

Phil [00:08:06] So it's up to the brokers to inform themselves. And this is what this is what this podcast is about. It's helping the brokers to understand and, and, deliver to the customers what the customers are needing massively.

Kieran [00:08:19] But I think on demand as well. When we think about green mortgages, think about the way demand works in the market at the moment. So customers don't walk in off the high street and say, I've seen a fantastic mortgage rate, I'd like to buy a house, please. They instead go, I'd like to buy a house. How do I do that? Yeah. And it's the same thing with decarbonisation of homes that the demand will come on. The customers say, I need the finance to improve my home. How can I do that? And that's a range of options. Very similar parallels to other, capital raising for home improvements, such as a new kitchen or a single storey extension. What's the best way to finance that? Yeah, and for me this is about mortgage intermediaries understanding the nuances connected to green finance. So there's different products available for capital raising for home improvements if they're green home improvements rather than your kitchen, your single storey extension. And that's that's the kind of nuance between the two.

Rachael [00:09:05] But I think it's important to say that green mortgages have got a huge part to play in decarbonisation of the UK. So the the UK government has got a target to be net zero by 2050. They're 23% of carbon emissions according to the Climate Change committee, are from UK homes. So, if we can stop 23% a huge amount. So, if we start, reduce carbon emissions from them⁸.

Phil [00:09:30] I wonder what the percentage is from our cars. It's a lot less than that, isn't it? Yeah. And we all think worry about cars. It actually all homes causing the issue.

Rachael [00:09:40] Exactly. Whereas the technology exists in homes assessing cars well with electric vehicles etc., but solar panels exist, loft insulation, all those technologies, they already exist. It's just making them accessible to people to use. And that's why I agree mortgages got a hugely important part to play.

Phil [00:09:57] Can we talk a little bit about rates and cost of of a green mortgage. Who how how are the rates higher lower they are.

Rachael [00:10:05] So it depends on the mortgage products. So according to which if you get a discounted rate, it can be in the magnitude of 0.1%. And with mortgage rates so high at the moment, that can be really valuable to the customer. With this, with cashback, those cashbacks are generally in the order of about 500 or so pounds⁹. So not huge amounts.

Phil [00:10:32] Well, the key thing is the brokers need to understand how all this functions. And I guess it's true to say that as if we're recognising the interest is there from the consumer, then demand will follow. And once we've got more interest and more demand, then there might be a bit more help from the government.

Kieran [00:10:52] What I think is so fascinating about the evolution of green mortgage market is that when you look at different standard mortgage products, you'd start with a consumer need, you'd build out a product from there. If you're working in mortgage product team and then you'd end up with a product. We've seen a really different evolution in the green mortgage market. We've seen, as Kieran says, lenders. So financing these types of products. And that's because they recognise that climate change committee start is at £350 billion, needs investing in UK buildings in order to meet net zero by 2050¹⁰, just 26 years away, which is longer or less time than the average first time buyer mortgage term. So we really do have to address this as an industry. So we're beginning to see lenders, and I think lenders need a lot. Speaking as someone who used to work for lenders are perhaps a little bit biased. Lenders need a lot of commendation for the work that they're doing in order to stir this market up, but it does also need additional stimulus from other factors like finance is the enabler. Finance isn't the driver in this situation, and that's the kind of disparity we need to be to understand.

Phil [00:11:47] I'm asking you to kind of predict what the future looks like, but where would you see green mortgages might have reached in, say, five years?

Kieran [00:11:55] I'd like to see a continuation of the recognition of energy for energy bills in mortgage affordability. Yeah. Currently in the UK.

Phil [00:12:03] We shouldn't be that complicated to do well.

Kieran [00:12:06] Preaching to the converted hayfield. But yeah, it shouldn't. We at the mortgage market primarily runs off of owner status averages. So assuming that every two bedroom house in the country has the same household bills, I don't believe that serving customers at the top end or the bottom end of the market. So factoring that individually and recognising that in mortgage affordability, integrating solutions. So integrating those home services that I mentioned before as part of the mortgage journeys at the time, you remortgage from lender A to B, you're already having a mortgage valuation done. Tuck that into part of the process and support customer hand-hold them through. So we're not releasing cash to customers to go and play Google Roulette. Who are those trades? How can we support them through that journey? How can we verify that work has been complete to a standard? We're really comfortable with IT sector and then continue to support them on going with optimisation of their home.

Rachael [00:12:52] I think also like looking to the future as well. Climate changes don't like the impacts of climate change on housing is only going to get more apparent. Yeah. So when you think about we're seeing more flood events across the UK, we're seeing summer temperatures in excess now of 40 degrees¹¹. So actually retrofitting is about making the property more energy efficient, etc.. But it's also about protecting that household against the future of the climate change as well. And so mortgages are probably going to have to start to evolve and innovate to support households to protect against those events.

Phil [00:13:28] Good point. What do brokers need to know about green mortgages now and in the coming months?

Rachael [00:13:34] So for me, I think, speak from LNC. We need to understand better how they'll benefit the customer. We need assurances from the lenders that, they're doing it for the right reason and they're competitive. We want to know how to sell them. Yeah. And make sure that we've got the dialogue with the customers and the lenders and that we are supporting the evolution of them as well. And also, as mentioned, how they'll support customers in the future in the face of climate change. Yeah.

Phil [00:14:04] Thank you.

Kieran [00:14:04] For me, I really hope that brokers listen to this podcast and feel really excited about the opportunities. Significant investment is required in UK housing stock in order to meet net zero, and mortgage advisers find themselves uniquely at the nexus of this challenge and with those relationships with their customers to really help them. 84% of the UK mortgage market is intermediated¹². They're right at the heart of one of the only countries that have that make up is very, very different in Europe. I think for me, it's not overcomplicating it. As a mortgage professional, become an expert in financing green. Become an expert in understanding how your customer can connect themselves with the finance they need in order to achieve their ambitions. You don't have to become an expert in solar panels. You don't need to understand heat pumps to to finite detail. What you do need to do is be able to say, there are really interesting financial products out there that can help you, and I can give you access to them. And sticking to that and really, really upskilling in that it will stand you in good stead moving forward.

Phil [00:14:58] What's the one thing that you would both say the brokers, most importantly, should take away from this?

Rachael [00:15:03] I think brokers need to understand how they can stimulate the demand for green mortgages, working closer with lenders and with their customers to understand what products are out there, what the benefits are for the customers, and make sure customers understand those benefits as well. I think until we see the demand start to increase for our customers, I think innovation will naturally always be stifled. But we need that to improve and to increase. Definitely at pace.

Phil [00:15:27] Yeah. Great answer. Thank you Kevin. Rachel, anything to add to that?

Kieran [00:15:30] I'd really like brokers listening to this podcast to leave feeling enthusiastic about the future. There is such a significant opportunity to not only lead the transition to net zero here from a mortgage advisors perspective, but also to recognise that commercial opportunity of the investment that's required in housing and mortgage brokers really are at the heart of that. So leave fully enthusiastic leave also not feeling overwhelmed.

Phil [00:15:50] Good point. Great advice. Appreciate your time. Thanks for coming.

Kieran [00:15:53] On. Thank you, thank you.

Phil [00:15:56] That was Kieran Campbell of London and Country and Rachel Hannah set of the Green Finance Institute. The views expressed by external guests in this podcast are their opinions only, and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts.

Phil [00:00:02] Hello Phil Spencer here. Welcome to Mortgage Insider from Barclays, the podcast series for mortgage brokers. I'm a summertime property expert and TV presenter, and every fortnight I'll use my experience to get to the heart of the biggest issues in the industry. I'll be joined by industry leaders, brokers and indeed Barclays own experts who share their insights and expertise to help you navigate the challenges, changes and the opportunities in the world of property. The only constant in life is change, not my words. Those are according to the Greek philosopher Heraclitus. And he's not wrong. If this year is anything to go by, is he? There are national elections in the UK, the US and in more than 60 countries across the world. There are ongoing geopolitical tensions, plus the explosion of generative AI and AI, which is changing the way many of us work. And of course, all that follows. Hot on the heels of Covid and a period of higher interest rates and indeed higher inflation. So how can brokers adapt their businesses to deal with this ever-changing world? That's what we're here today to talk about. And I've been joined by two people who are going to do exactly that. Max North, a director at strategy and the strategy consulting arm of P.W. see, who specialises in financial services. And alongside him is Liz Syms. Liz is the owner and founder of brokerage Connect Mortgages and the owner of the mortgage network Connect for intermediaries. Let's perhaps we can kick things off, with talking about the challenges currently facing brokers because there's been, as I say, a whole load of events over the last few years that have meant large changes in the industry and whether that's Covid or working from home. We've had many, many budget. We've had higher interest rates, we've had inflation, we've had cost of living. You know, it seems to me this year of all years presents a whole lot of new challenges. So, we let's just, talk about the ones, the key ones that are facing brokers and that are impacting the daily lives and indeed the advice that they're giving.

Liz [00:02:22] Yeah, absolutely. I think, where do we start?

Phil [00:02:26] So let's kick off with a big one.

Liz [00:02:28] Kick over the big one. I think in terms of, you know, there's still some challenges that, coming through, still continuing, should I say, so we're still in quite a volatile environment from a rate perspective. It's not as bad as it was settled down. It is settled a bit. But, you know, swaps are still moving up and down. Predictions are still a little bit here and there. And every time there is that little bit of volatility, you find the lenders, you know, pulling rates to put them up, pulling rates to put them down. And that creates a challenge for mortgage advisors trying to keep up with that environment, but also to manage their customers expectations because it's not an immediate when you have a conversation with a customer, it's not immediate. You go, okay, right, we'll pick that rate and we'll go. Now you're generally having a conversation over a period of time, and you're talking about a.

Phil [00:03:32] Rate of discipline.

Liz [00:03:33] And then you're having to say to somebody, you've got to move now, and you've got to make that decision really quickly, or you're going to lose your rate. And, that, that creates but a tension or a, you know, you can find a customer, come back and say, well, why didn't you tell me that rate was going to go? So that that's that's still an ongoing challenge. I think, we've had, a new piece of regulation, obviously, a big piece of regulation, which was consumer duty. Challenge for brokers this year is how has that embedded? Have they gathered the right management information? But the FCA, the Financial Conduct Authority, we're looking at what learnings have they got from that. So for example with complaints, you know, what was the underlying cause of those complaints. And then what changes have they made in their business to address that and make sure things are better moving forward?

Phil [00:04:31] So this is I guess it'll be a few years before before we know how successful that's been.

Liz [00:04:37] I think so, but I think there's an expectation, from the Financial Conduct Authority that we're, in fact, not just an expectation, a requirement that we are evaluating a year in what information we've gathered so far. Yes. And what what does that mean? That's the most important thing that the FCA is looking at. What does that mean and what action if we take in off the back of that? So, you know, that's another ongoing one.

Phil [00:05:04] Max, am I right in thinking that, you've done some research into, into customers and how they are finding the process and where the problems they perceive? Oh.

Max [00:05:14] Yes. Well, we've done quite a lot of research in this space. And what's very interesting is that actually it's the interconnection between the different parties in the transaction that causes a lot of the customer issues. We have very high levels of failure rates in terms of transactions. So 40% of customers experienced a delay of over three months in their recent property purchase, and actually 63% experienced unexpected costs of over £1,000 during that process. That's a.

Phil [00:05:41] High number.

Max [00:05:42] Yes. And then, of course, we know that we have a lot of full freeze as well at the same time. And and that's really because of the lack of collaboration. If we think about this in terms of the regulatory environment, we have different regulators covering the brokers, covering the conveyancers, covering the surveyors. So there's no single framework that's driving consistency. And then when we look at actually how the tools and the and the digital technologies that they're then used to collaborate between each other, we're still actually very much relying on email. And there is no single common data standard for sharing information up and down that transaction.

Phil [00:06:13] I think we'll get one.

Max [00:06:15] I think there's a lot of work towards that for sure. I think both at the government level, there's a digital property market steering group now that is bringing together all of the relevant government departments. I believe there are also a number of. Of our industry, sort of as initiatives that are also happening around this space. But it's just it takes a lot of time because it's dependent on quite significant technology change on the part of each of the individual actors in the process.

Liz [00:06:38] Yeah. The the Open Property Data Association has, been tasked by the steering group to actually create that common language. From a technology perspective, between all these parties, which they've been working on. Well, that's a really nice question.

Phil [00:06:54] We will get those.

Liz [00:06:55] Yeah, yeah. Yeah, absolutely. There's that there's a lot of, there's a lot of, things behind that now to help us get there.

Phil [00:07:03] Yeah. The it's easy to imagine that brokers listening to this think, we've heard this before. They've been talking about making the whole process efficient and quick for as long as I can remember. But actually, right now it feels like there are a lot of initiatives and there really is some groundbreaking stuff happening.

Liz [00:07:18] I think it's a completely different environment today.

Phil [00:07:23] Max, how would you say brokers should counteract some of these challenges? It's complex. There's 170 odd lenders out there. And now nowadays there's loads of specialist loans and specialist lenders. How should brokers best kind of contend with it all?

Max [00:07:41] Well, I think actually you need to start with actually the customer segments here because actually we're seeing very different responses that are needed depending on the individual segment. So if you take the buy to let industry, for example, the typical profile of a buy to let landlord was very different over the last 5 to 10 years to how we anticipate it's going to be going forward now. So the pressure that we see in terms of the yield on properties and actually the tax environment that now exist, means that actually we're going to see a greater focus on and professionalise landlords in that space. And therefore brokers need to think about that customer need far broader than just the mortgage itself, but actually think about the broader portfolio and the, the, the wider set of requirements that, that broker, that, that customer needs to then fulfil. There are other then changes, you know obviously at there some of the more residential end of the spectrum clearly cost of living crisis and the, the average age at which people start to get onto the property ladder continues to be a challenge and is, is increasing all of the time and.

Phil [00:08:43] Actually with rents.

Max [00:08:44] Absolutely. And the, you know, the role of intergenerational wealth transfer and how people think about family structures and, and the passing down of wealth to enable that, that home buying experience for, for, for the younger generations is super critical.

Liz [00:08:58] I think to him, knowledge is absolutely key as a way of counteracting things, I think. You know, it, it builds confidence the more you know and the more you understand in the market. One of the challenges is with things like Covid. People are now working far more from home, and there's not the same kind of interaction that there always was with the lenders. So, for example, in our offices prior to Covid, we'd have a, you know, two lenders in every day, one in the morning, one in the afternoon, and they would talk through the products and they would engage and they would give knowledge to the advisors. But now if they come in, there's not many advisors in the office anymore. They've all chosen to kind of work from home, and maybe they'll come in once or twice a week and, and so that there's a disconnect with what they need to do, which is to grow their knowledge and what is actually happening at the moment.

Phil [00:09:54] In a world that is fast changing.

Liz [00:09:56] Yeah.

Phil [00:09:58] Actually, brokers need to be more informed than ever.

Liz [00:10:00] Absolutely. Really is key. Yeah.

Phil [00:10:03] I've been talking a little bit about AI recently and how that is changing things, but actually, at the end of the day, people need advice from a human.

Liz [00:10:11] Yes. Yeah they do. And I think, I think I, it's one of the challenges. It's also one of the opportunities. So there are challenges around AI that you know, all the worry about. Will I take over the advice process? And there is other challenges around AI in relation to perhaps fraud. You know, we are we are highly regulated and lenders, as you know, expect brokers to complete, a very high level of diligence on their applications to make sure there isn't fraud. But of course, now fraud is getting very much more sophisticated. We, you know, with, you know, impersonations with, clones and voice clones and things like that and copies of documentation. So I think the way to counteract that is to adopt it. And that's not something book devices have always been as strong as they could be.

Phil [00:11:17] What do you mean?

Liz [00:11:19] Well, there is there's always been lots of technology, but not everybody is using the technology even today, to its full capacity. Yeah, I do often see, you know, the, advisors will perhaps have a system and they'll use the bits that they know. Yeah, they don't want to change to a new system because they get used to it. We're all guilty of that. And it's totally understandable. But we're moving into an environment that I think it's crucial that advisors adopt technology and use it in ways that counteract those risks. So use it to help them detect fraud, use it to help them improve the processes, use it to help them improve their skills, or communicate with a customer in a different language. There's lots of different ways they could really use it innovatively, and help and counteract some of these issues.

Phil [00:12:14] Any thoughts on that one, Max?

Max [00:12:15] Yeah, I would actually argue that actually is even more important than just thinking about this as brokers. Because actually, if we look at property transactions in the UK, there is a lot of customer detriment. And often, you know, third of all, property transactions fall through. We see very high levels of unexpected cost in the process. So as an industry, we need to collaborate more. And that means common data, common standards of process. And actually, how can we use technology to be a way of increasing transparency and efficiency across that process, both for good customer outcomes but also for it gives greater commercial certainty on the part of the brokers as well.

Phil [00:12:50] If only it was easy as that.

Liz [00:12:53] Yeah.

Phil [00:12:54] We are all pushing in the same direction. Yeah. All businesses, all consumers, they want efficiency. They want speed. They want it to be easy to understand.

Liz [00:13:02] Yeah I think you know for, for some advisors they could be using some of those tools at the moment in their own businesses in different ways. The things that are available to them, if they open their mind to those opportunities, they don't necessarily need to wait until some of the bigger corporations actually make those changes. They can be using certain tools at the moment to really enhance their business.

Phil [00:13:27] So so there are challenges, but there are also opportunities. That's what I'm picking up. Yeah.

Liz [00:13:33] Definitely.

Phil [00:13:34] And at the end of the day, the brokers if the brokers have a proper relationship with their clients. That's, that's, that's the kind of central thing where they add value isn't it. Absolutely. I mean I and all the other different things that will assist. And there's lots of lots to come down the track. But if a trusted advisor is the person that the consumer. Is going to go to, to to kind of sign things off. Yeah.

Max [00:14:01] All the customer research we do shows that actually. What's the biggest driver of selecting a broker. It's previous relationships. So it's super critical that the broker remains relevant throughout them.

Phil [00:14:12] It's like it's like a family friend. And that's that's what the broker needs to be.

Liz [00:14:16] Yeah. And I think, you know, there's always been a, you know, focus on, you know, how do I get a new lead, how do I get a new customer? But it's actually, you know, you know, when you have a customer, you learn an awful lot about that person throughout that process. So you're in an incredible position of actually data. And, and therefore you have the ability to really build a relationship that other people can't. So concentrating on building stronger relationships with a smaller number of customers is key. You know why? Why wait until the five year fixed rate comes to an end to speak to the customer again? You should be speaking to them every six months. Yeah, I was.

Phil [00:14:59] I was going to say it's a delicate balance isn't because your client doesn't want you to ring up every month and ask for a coffee, but but you do need an ongoing relationship.

Liz [00:15:08] You do. And there are kind of, you know, when there are ways that you can make that ongoing relationship relevant to that customer. Yeah. You know, if by understanding that switch, you are in that privileged position to do so. You know when that birthday. So you know, you know when the you know, the families birthdays are the first, you know, you if you are doing holistic advice and you are arranging their property insurance, you've at least got a yearly point of contact. You should be talking to their other insurances and repeating that every six months. And so there are lots of touchpoints that advisor can build in and build that relationship. But I think also the key thing, which is a big opportunity as well, is, is becoming a hub that the customer knows they can turn to for any financial inquiry. So, you know, that advisor might only do mortgages and protection, but the customer knows that. Well, actually, how do I how do we deal with my pension? So then as they can turn to that trusted advisor who can put them in touch with somebody else that they trust as well? So it becomes a real hub of a financial relationship.

Phil [00:16:25] Max, can you just talk a bit about, how things are around the world and how they compare to the way that mortgage brokers operate here and, and the challenges that we're seeing? Is is it similar around the world?

Max [00:16:36] No, it's actually very different. So actually the UK has the highest level of mortgage brokers, mortgages relative to other nations. So around 8% of all mortgages are intermediated by a broker in the UK. If you compare that to sort of second and third place with the Netherlands and Australia, that's down at the sort of 65% level. And the US actually is, is towards the bottom of the, of the table. And that's around about the 20% mark.

Phil [00:17:00] So why so different.

Max [00:17:02] Well firstly it's because we've got more complex product structures in the UK. The nature of our fixed term rates require a lot more support and actually drive a lot more, need to more regularly interact with a broker to understand those products. Secondly, our property market is very challenging. We've got higher affordability challenges in terms of the property itself, very high population density. And that means that people actually need to move house more frequently than they do in other markets. Okay. And that means that there's a there's a greater planning, element to actually the broking advice that needs to go with.

Phil [00:17:36] That got to be more strategic.

Max [00:17:37] It's absolutely you can't just intermediate the product and then forget about it for the next 25 years. You've got to build it as part of a broader financial plan. And think about your both your family circumstances and also your longer term wealth and retirement planning at the same time.

Phil [00:17:51] What about some brokers out there who might be feeling anxious about what's what's ahead? Any thoughts for them? You know, they might be thinking, how is my job going to change? Housing market issues and concerns. What's that going to look like? And it's just a bit about how they look after themselves and their own wellbeing in what is a challenging and changing time.

Max [00:18:13] Well, actually, I think in the, in the short to medium term, I think things are looking more positive. If we compare sort of the, the OBR economic forecasts that came out in March this year versus where we were, say, in autumn 2022. Yeah, there are three big drivers of actually housing market housing transactions. And that is real wage growth, interest rates and property prices. And what we've learned is that actually real wage growth has been better than expected. The interest rate peak wasn't as high as we once feared. And actually property prices have been relatively resilient. And therefore, actually, do we see that there's going to be a continued low volumes like we saw in 2023? Actually, no, it's more likely that we're going to get back to sort of pre pandemic norms in terms of those volumes and flow. So that's that's obviously. Great. I think more broadly, there is going to be a need to adjust the model over time and think about what are the ancillary services, though that brokers remain relevant. And some of those areas are clearly areas where brokers are going needs into upscale. So retrofitting and ensuring properties are sustainable will increasingly become a client topic in the future. Okay. But I think that's just part of the development journey for a broker rather than actually a challenge that they need to be actively worried about.

Liz [00:19:25] Upstate. And I think I think, again, coming back to what we were saying earlier about, you know, more brokers working from home, not coming into the office environment. You know, lenders are really, really good at providing ways for brokers to network and get education. So it's about taking advantage of that. There's always locally events going on where you can meet others. You can talk about the experiences they're having and that can help, you know, allay some of your fears and give you a bit more confidence that you're not the only person that sort of struggling with some of the things out there and find some of the solutions to it as well, through that kind of contact with people.

Phil [00:20:05] Liz, how does a broker bring value in the future?

Liz [00:20:11] I think it's really important to, not remain as just as a generalist in terms of the advice, I think it's important that advice is in the mortgage market, have the ability to understand all different mortgage types, but actually become an expert in 1 or 2 areas that really appeal to them and that are topical in the market. So for example, that might be complex buy to let you know quite a lot for in property investors, as we've talked about the way that market might go, understand limited companies understand offshore trusts understand large HMO. So when they become a specialist there. Yeah. Or it might be first time buyers and shared ownership, whatever is the product they love. And the way to do that is with the lender relationships. You know, lenders are actually really, really keen to share knowledge to provide training support. And.

Phil [00:21:23] You've got to be proactive.

Liz [00:21:24] And you do. Yeah. You do need to seek that out. I mean, you know, we provide our advisors with a list of all of the different events that are going on so that they've got that opportunity. But you can you can go on to, to, to Google and just say, what are the lenders events coming up there? If you're registered with the lenders, they're going to be sending you regular emails and saying, we're doing this event, we're doing that event and you're winning on both ways. Then because you're gaining that knowledge in particular areas, you're gaining confidence and you're meeting and networking with others, which is great.

Phil [00:21:58] So it doesn't matter whether you're working as part of a large corporate or you're working on your own.

Liz [00:22:02] Not.

Phil [00:22:03] Got to upskill yourself.

Liz [00:22:04] You've got to upskill yourself, interacting, and you've.

Phil [00:22:06] Got to get ahead of it.

Liz [00:22:07] Yeah, definitely.

Phil [00:22:08] If there's one thing that brokers should perhaps take away from this conversation. Any comments from either of you, what it might be?

Max [00:22:16] I think there's probably a couple of things here. So firstly, from a from a customer or client standpoint, it's all about ensuring that you're acting as an advocate and a trusted advisor to the client and actually being relevant throughout both the home purchase itself, but then the ongoing management of the property and finding relevant ways to maintain that relationship throughout the lifetime of that property.

Phil [00:22:36] Yeah.

Max [00:22:37] And then from the lender side, remembering that actually 80% of all of the lender's volume comes from the broker community. And actually the lenders view the brokers as important as the end customers in this. So we're looking to ways to access those lenders and really maximise the the benefits of their scale and information that they can share to add to your proposition for your clients.

Liz [00:22:57] Absolutely. Just just be curious, remaining, adaptable, open to opportunities, staying informed and making sure that they leverage the tools that are out there and available, updating their skills and then building and retaining that client trust.

Phil [00:23:20] Words of wisdom. Thank you both very much. Great to talk to you.

Liz [00:23:24] Thank you, thank you.

Phil [00:23:25] That was Max, an author director at strategy, and Lucy and Liz Sims, who is the owner and founder of Brokerage Connect Mortgages. The views expressed by external guests in this podcast are their opinions only, and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts.

[00:00:02] Phil Hello Phil Spencer here. Welcome to Mortgage Insider from Barclays, the podcast series for mortgage brokers. I'm a summertime property expert and TV presenter, and every fortnight I'll use my experience to get to the heart of the biggest issues in the industry. I'll be joined by industry leaders, brokers and indeed Barclays own experts who share their insights and expertise to help you navigate the challenges, changes and the opportunities in the world of property. In this episode, we're looking at when your financial circumstances improve. How can brokers help their clients when they have more money than expected? To talk more about this, I'm joined by Carly Cheeseman, who's a broker, and also by Robyn Allen, who's a content creator, financial advisor and partner development manager at the Open Work Partnership. And just to point out, we recorded this episode on the 22nd of November. Hello to you both. Hello. Good to see you. Thanks for having us. This is. This is a nice, positive chat we can have, but let's outline the the types of situations. If we can just kick off with where people's financial situations improve. Does it happen often? Is it? I mean, it sounds a wonderful thing to happen.

[00:01:24] Robyn I think I think a lot to come across. A lottery winner is always on people's wish list, isn't it? So that doesn't always come up.

[00:01:30] Phil You've got to be in it to win it.

[00:01:32] Carly You have that. Well, many years ago there was a spate of scratch card winners in my hometown. Okay. And I worked in a retail bank at the time. Yeah. And we had 4 or 5 people come in when in sort of 250 and 500,000 and scratch cards. Very bizarre, but not very often. That was 15 years ago.

[00:01:48] Phil So powerful lottery wins.

[00:01:50] Carly Inheritance?

[00:01:51] Robyn Absolutely. And I come from an insurance background. So you have the payouts from critical illness policies or even life insurance policies that can come into people's lives.

[00:02:00] Carly Yeah, it's inheritance is probably the biggest one and the most often. And that's when people want to come in and review things and have a proper chat, because that's the most likely scenario. Yes, lottery wins in life insurance payouts are less often.

[00:02:14] Phil It would be a strange conversation to have. They wouldn't because there was a sense of loss and sadness, but equally there was a gain or financial gain.

[00:02:22] Carly Yeah, absolutely. And it's a good time to review things. You know, mortgages and finances overall. So the whole picture. Because you have to structure things in the right way to make it work in the long term for the client. I think people automatically think, oh, I have an inheritance. Let's just pay the mortgage off in full. Yeah. But actually you need to sit down and gain a full picture of the client before making any forward decisions. I think you probably agree.

[00:02:43] Robyn No, absolutely. And I also think it's educating people in all the areas that can be an improvement. So sometimes they don't realise quite how their career might have progressed over a few years and how their income has significantly changed, or the child has gone back to school. So a parent has gone back to work and their income into the household may have doubled. Yeah, and that has a significant impact on what is going on in that overall financial picture.

[00:03:07] Carly Because inheritance immediately people think pay the mortgage off. But as you're saying, with children, career future plans, it might be worthwhile putting money aside for university fees, private school fees. It's not necessarily all about clearing that mortgage debt straight away, obviously depends on the mortgage interest rate that go on as well.

[00:03:24] Phil Yes, yes. Particularly at the moment. Yeah. Do you sometimes get into conversations with people on, on on finance or planning and looking ahead where they say, actually, I'm not going to worry about it because I'm going to inherit? Yes, yes.

[00:03:37] Carly All the time. And it's it is quite a hilarious conversation, even though it's quite a dark conversation, because sometimes you'll have people come in and they want to discuss an interest only mortgage, which is quite difficult to obtain on a residential basis these days. But they will say that their method of repayment is inheritance. And I say, okay, that's great, but your mortgage is ending on X date. Can you confirm that your mum will die by that date? Because that's how they're saying they're going to repay it.

[00:04:05] Robyn It's a brutal, honest truth though, isn't it? Because yeah, I don't have a crystal ball.

[00:04:10] Carly Yeah they don't. And you know, these these things happen and it's terrible. But you can't use that as a method of repayment on a mortgage. But you wouldn't believe how many people think that that's okay to tell an underwriter that okay. Yeah.

[00:04:21] Phil Interesting. Interesting. So I guess a lot depends on your relationship with your clients. And if you've got a long term and a yes and an open relationship. Yeah. Then then you'll know more about their situations and how to advise them best.

[00:04:35] Carly Absolutely I completely agree. I've been in the industry a long time, and a lot of my clients personally that I deal with, they've been with me from the beginning, and I think that's because I've built a good relationship with them. I understand them, understand their future plans. Yes, we review things regularly, which is really important as well. Ben was saying career plans, children plans. You know, people's lives change and it's keeping in touch with all of that.

[00:04:57] Robyn And I think that that's the best. And that's what every adviser wants to be. Every firm that I work with, within open work, that's what they all aspire to be because we're moving into this place now, especially following consumer duty changes and not doing any foreseeable harm is we can't walk past anything now in financial services. So if you identify another conversation needs to be held that you may not be qualified to do right, you need to go and signpost and say, right, I'm looking at you, mortgage. You've come to me because you've had some money come in. But actually we need to widen this conversation up and make sure that we're considering all of your future goals. Are you in your dream home? Is everything set up for the kids and your hopefully comfortable retirement?

[00:05:41] Carly I totally agree and I'm not a huge fan of this word, but I think a holistic approach when you're speaking to your clients to gain a wider understanding of what their current situation is and what their future plans are. And that's, that's.

[00:05:53] Phil Good, to be honest with you and people, you know, finances and life aspirations and ambitions. This can be quite private.

[00:06:00] Carly Absolutely. So you have to build trust with your client. Yeah. Yeah.

[00:06:03] Robyn And that was one of the things with creating. Online and put in a personality out there, especially when I was doing protection advice.

[00:06:09] Carly It was that's extremely personal protection. Advise you have some intrusive questions.

[00:06:13] Robyn Oh, very. I was very intrusive in a lovely way, everybody. But it was right. I need to know everything. Your inside like measurement I need. I was told things that their own family wasn't aware of, but it was really important to the conversation. But that would help me guide and signpost for the other areas they needed to consider and think about. Because we need to look at big picture, not small window.

[00:06:37] Phil Yeah. So this is all becoming really in in the sort of microscope because of consumer duty, isn't it?

[00:06:44] Carly I would say so. I think it's definitely put a spotlight on things and perhaps, maybe forced people to readdress things that maybe have fallen by the wayside in the past. I think you'd probably say the same. Yeah.

[00:06:55] Phil Is it something that you're mindful of every day, every every conversation you have with the client?

[00:06:59] Robyn Absolutely. And I think our firms would agree. Now it's starting to become something where we practice what we preach. But I think over the years in the industry, there's just been some bad habits. Yeah. People have become pigeonholed in specialities and they sort of at times would have the blinkers on when it came to considering a client's full needs rather than just what they're there to do.

[00:07:21] Carly We were having a similar conversation just before we came on the podcast. I mean, I guess it is in relation to consumer duty, because it was about being transparent with people and being clear and concise with how you communicate with them. Yeah, I think this industry has a slightly tarnished reputation because you get lots of people, slightly older generation, that will maybe talk in jargon and try and tie the client up in knots to get them to sign up for things. So consumer duty's brilliant, and I think it's really made people readdress the way they speak to their clients and be clear and concise and speak in a language they understand. Yeah.

[00:07:53] Phil I know that you've both worked on your own independently and now both work for quite large organisations. Just talk to me, if you would, about consumer duty and the challenges of of adhering to that for somebody who's working on their own.

[00:08:07] Robyn I think obviously open work. We are a financial services network, so we as an organisation have done most of the legwork for our firm. So we've been able to give them checklists and processes to follow to make that transition easier. For some firms, it's not a great deal to do because they were doing it in the way that it needed to be done anyway. And for some, there's more work, but ultimately consumer duty for those that are already doing it isn't a massive change. But what it is is it's a reflection. It's people taking accountability.

[00:08:41] Carly Yes.

[00:08:43] Robyn And I'm sure you've probably started to see the same in your work.

[00:08:46] Carly Yeah. I think when you're by yourself, it's about having the right support network. So a company like your your company will be entered to support you if you are a self-employed advisor, just to make sure you're keeping on top of things in your, you know, complying with the regulation, it's just about being clear and concise and asking your client if they understand. And I think you do that a lot when you're self-employed as well.

[00:09:07] Robyn It was a reason I went to a network, and I always used to say I just wanted a buffer between myself and the Financial Conduct Authority to make sure I was absolutely doing the right thing, because my clients were the most important part of my world. And that's what I preach to everybody else.

[00:09:24] Phil Great. Good to hear. So if somebody has come into some money and they've come to you and say, I want to pay down the mortgage, is it always the is it always the best thing to do?

[00:09:36] Carly It would depend on the individual client on.

[00:09:38] Phil And so let's just kick that idea around a little bit. Yeah. When does it when is, when is it right. When isn't it right.

[00:09:42] Carly I mean it would always be fantastic to clear the mortgage in full. That would be great. For example, if you had a client with a 500,000 mortgage and they've had a £1 million inheritance, the likelihood is I'm going to say clear the mortgage in full. It makes perfect sense. But if they've got a 500,000 mortgage and five 500,000 inheritance, I would want to sit down and address where they were in life. So sort of what we were talking about earlier on, you know, if they've got children that are perhaps due to go to university, maybe should we set aside some money for fees and make a partial overpayment on the mortgage? And also in relation to the mortgage itself, you would want to see if they were fixed into a deal. Yeah. Because if there's any early repayment charges attached, you know what. What's the point in paying a ten grand GRC if the rates due to finish in six months time or 12 months time. So it's working out sort of that specific mortgage product they have and then perhaps maybe their short to medium term plans.

[00:10:35] Phil And even their long term plans. Yeah. And you must end up talking about retirement. And yeah.

[00:10:40] Carly Definitely.

[00:10:40] Phil Budgeting for that is is a challenge in itself.

[00:10:43] Robyn And it is that if you've got to know your client very well, you know, whether they're in their end goal dream home or not so far. So yeah, it's that's the one that three bed semi they were in when they got married. And they've always spoken to you about the fact they want to upgrade. You might say right. Let's consider financially what's going to be the best thing. Is it going to be paying off the current mortgage or is it going to be right? Put this cash to one side, go and find that dream property. Yeah, maybe port your mortgage, maybe add some money and maybe go and get a fixer upper and add value investment. But it's also basics like what's your emergency fund looking like?

[00:11:20] Carly Yeah.

[00:11:20] Phil What's the right answer to that question?

[00:11:23] Carly I would say yes. Pay the mortgage off would be the absolute right thing to do, because you're going to reduce your outgoings and have lots more disposable income. But just check the rate.

[00:11:31] Robyn Yeah, okay.

[00:11:32] Carly Check the rate in the products because it's, you know, you don't want to pay unnecessary.

[00:11:35] Robyn Fees and make sure you've ticked a few of the boxes and and that sanity check of. Right. Have we got an emergency fund. So well and good reducing your outgoings. But if you've not got your emergency pot set up when something goes wrong the following month, great. You're not paying £1,000 a month out, but you now haven't got the ten grand you need to pay to replace the call.

[00:11:53] Phil Yeah, so much of this for I'm picking up from you both, I suppose is right. And that's I expected. But this is about communication. About relationships. Yes. And developing those relationships and understanding one another. Yeah. Being being honest. If you have that good ongoing relationship with a client over a long period of time. Yeah. That's when you'll be able to give the best advice. Yeah.

[00:12:16] Carly And absolutely. That's how I was self-employed for so many years. All of my business came by way of recommendation or referral. I do business for entire families aunts, uncles, brothers, sisters and and I think that's a solid way to have longevity in the business as well.

[00:12:32] Phil But you still got to go out and win new clients.

[00:12:33] Carly Yeah, of.

[00:12:34] Robyn Course, but I think some of it is also coming from I think brokers now need to consider their approach because we've had a lot of five year fixed happening, and five years is a long time to potentially not talk to your client because some brokers go from I've set your mortgage up to I'll see you when the right comes up. That's a long time to not talk to somebody, and that's a long time for them to be swayed somewhere else. I think we as an industry, need to get better as we need to, and we see that regular contact making sure those reviews are happening. The mortgage may not be up. We still need to keep on top.

[00:13:07] Carly That's something I'm really passionate about. Staying in contact with your client and keeping them up to date with things that are going on in the industry. We do regular mouth shots to our clients, depending on where they're located geographically, and you know what may be relevant to them.

[00:13:20] Phil About what's happening in the market generally or the financial housing market or financial market.

[00:13:25] Carly A bit of everything, a bit of everything is in there. Usually quarterly, we'll send something out and people can unsubscribe if they wish, but it's very few and it's just staying in contact but not staying in contact too much so that you're irritating to staying in contact enough so that they know that you're there and they're reminded of you, and you know they can come back because there might be something within that, you know, financial snapshot we send them that's not mortgage related, you know, wills, pensions, investments. And they might pick up the phone to you and say, actually, can we have a chat before the fixed rates are.

[00:13:55] Robyn And that happened with one of my firms. I contacted the client just to check in and found out they'd had a lottery win. So when I was checking that it just happened, that's brilliant. And that they wanted sort of things first and then they were going to sit down with them. But again, if they'd have waited until a particular time that might have been sorted by somebody else rather than somebody that already knows their situation. We just don't know. Yeah.

[00:14:17] Phil Any other kind of examples of clients that you've helped that the other brokers might be intrigued by?

[00:14:23] Robyn I did have, a few years ago I had set up some insurance for a client. It was following a relationship breakdown, and I set up a policy in the February, and I got a message in the July saying I've had cancer. Do I need to tell anybody? Me? Absolutely. You need to tell me. And we did the claim, and they had the money straight in their bank account within a month to go up and pay their mortgage. And I got the text message saying, do I have to pay my mortgage off? And I went, oh, hello. Where are we? Yeah, as long as we're not going to Vegas. But it was that situation. They were in their 30s and they chose to use the funds with their current property equity to upgrade the property they were living in. So they did have that situation. And when I'm not in my forever home, let me use this money because I was on the road to recovery at that time and was ready to move on.

[00:15:19] Carly Yeah. That makes sense. Makes perfect sense.

[00:15:22] Phil What would your advice be to somebody who say worked in sales or in the city and got a bonus or an annual dividend or something like that. So they've got money in the account? Yes. That they weren't needing day to day. What would your advice be?

[00:15:38] Carly That would be certainly a conversation to have around an offset product. So, sort of 10 to 15 years ago, the flexible offset products were very popular in the industry. There are few and far between now. It's definitely a conversation worth having for limited company directors, certainly because they take large dividends. And as you mentioned, clients that receive large bonus income offsets are great because you can pay the money into the mortgage, reduces the interest you're paying, but you can also take it back out as and when you need it.

[00:16:07] Phil So it's a bit like a overdraft.

[00:16:09] Carly Yes, yes. Yeah.

[00:16:10] Phil But a description.

[00:16:11] Carly Absolutely. And there's actually a lender we work with and it's almost called a current account that's attached to the mortgage. So you can sort of just send off a request. And within 48 hours the money's come back out. So I mean there's lots of scenarios I have help clients with this in the past that aren't even limited. Company directors, or sort of large bonus income clients. I've had people in the past that would take a flexible offset product and take, almost like a large overdraft facility. So just to give you an example, you could have someone that could come in and the affordability would allow them to borrow 800,000. They only need 400,000. I would always set the limit at the higher limit of the 800,000, because that client then has an additional 400,000 to play with whenever they want. And, you know, they may not want to use it. Yeah, yeah, they may not use it at all. And you're not being charged for that when you're not using it. But maybe in five years time they might think, well, actually I want to buy an investment property. Yeah, they could take that money out, purchase it outright. The flexible offset is a really underrated product that I wish they would bring back a little more in the industry, because only a couple of providers offering it.

[00:17:15] Phil Why? Why would you say it dwindled?

[00:17:17] Carly I would struggle to answer that. I think simple terms, fixed rates, are attractive to lenders, and they can tie the client and, and keep them there for a long time because traditionally, with a flexible offset, there's no early repayment charges. So they can leave whenever they like.

[00:17:34] Phil Anything else that you think brokers should take away from this conversation? It seems to me it's about relationships. Yeah. And an ongoing trust.

[00:17:43] Carly I believe that, yeah. I think something for brokers to take away is to don't underestimate the mortgage industry. I think traditionally in financial services, everyone believes that an independent financial advisor should stay in contact with their clients all the time because they complete annual reviews and mortgage advisors or brokers will complete, you know, a two year or five year review. And that's it. That's all they do. But don't underestimate the brokers. I think constant communication with your client. You know, keep in touch. Build that trust. They'll come back. They'll refer people there, recommend people. Just keep an open line of communication with them.

[00:18:19] Robyn And an open mind as well. And don't assume that they say nothing's changed and that I'm a big advocate of this recently, which is we talk about life events in the industry. So you have kids, you get married, you get divorced. But we need to consider those things like I mentioned earlier. So when a child goes back to school that you may have been paying child care for you, suddenly you've gotten a massive extra piece of money that you can use every month. And that probably needs a conversation to make sure that's being used in the most appropriate way or cost of living. I have to mention, at some point you may have had a household that when you saw them 2 or 3 years ago, they could cope on either either income. Yeah. Whereas now they need both because of how things have risen or their salaries risen, and it's become even more so.

[00:19:06] Carly Regular reviews of all life events, not just children, married, divorced, all of those regular reviews because of change in lifestyle.

[00:19:14] Robyn For lifestyle changes. Exactly.

[00:19:16] Carly Definitely.

[00:19:17] Phil Well, great advice from you both. Much appreciated. That was Carly Cheeseman and Robin Allen of the Open Work Partnership. The views expressed by external guests in this podcast are their opinions only, and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts.

[00:00:01] Phil Hi. Phil Spencer here. And this is Mortgage Insider from Barclays. The podcast series for mortgage brokers. I'm a property expert and sometime TV presenter, and every fortnight I'll use my experience to get to the heart of the biggest issues in the mortgage sector. I'll be joined along the way by industry leaders, brokers and indeed Barclays own experts who will share their insight and expertise to help you navigate the challenges, changes and opportunities in the world of property. The buy to let segment of the housing market has certainly undergone huge changes in recent years. Not only is there the stamp duty surcharge on second home purchases, there's also all rental income from buy to let properties now being taxed for individuals who are higher rate taxpayer. So that's prompted some rethinking on the part of both landlords and brokers. There's been a big rise in landlords setting up limited companies for rental properties. Apparently nearly three quarters bought through this route last year. There's also the renters reform bill on the horizon. And to talk more about it all, I'm joined today on the pod by broker Emily Mays. Emily is the founder of the Mortgage Stuff and is based in Cheltenham and London. And also by Gina Peters, a partner and head of landlord and tenant law at Dutton Gregory Solicitors. And just to point out, we recorded this episode on the 22nd November. Great to see you both. Thank you for coming on the podcast. Should we just kick things off with a brief perspective from you both on the vital app market as it currently stands? Because it's it's gone through a lot of change the last few years, hasn't it? Where are we at today? Would you say just a synopsis?

[00:01:53] Emily It certainly is a tough market to be in for investors for sure. I think gone are the days of an easy investment where you just put down a 25% deposit and everything else is kind of sorted out for you. There's a lot more thought that needs to go in behind the process now to make it an investment that's worthwhile.

[00:02:12] Phil People have got to be much more strategic than they have in the past.

[00:02:14] Emily They do. They really need to think outside of the box at the time now, not just going down the standard routes, thinking of HMOs holiday lets doing it through a limited company. So there's a lot to think about in today's in today's market.

[00:02:29] Phil Gina, how are you seeing things on from from the legal side?

[00:02:33] Gina Well, this used to be an area where you could guarantee that investors were taking up plenty of mortgages, shall we say. Yeah. And suddenly the brakes have gone on, and it seems like a perfect storm has been created a little bit in terms of whether or not landlords are going to invest those in it. For the longer term that the true investors realise that property still is a great bet. It's a great investment and it will generally provide good yield on it if.

[00:03:02] Phil You're in it for the long.

[00:03:03] Gina Term, if you're in it for the long term.

[00:03:05] Phil And are you seeing new investors, are there new investors coming to the market?

[00:03:11] Gina I wouldn't say so many, no. And the stats are the same.

[00:03:14] Emily My business levels for the buy to lap, side of things is definitely dropped, but it's not nonexistent. But I think I agree with what Gina said. It's more so suiting those that are in it for the longer game. Yes. Not the immediate fast return on on income.

[00:03:30] Phil How about all that previously invested people getting out of it? You seeing it in reverse?

[00:03:39] Gina It's not easy, but it's not an easy decision, because those who have used property as a pension portfolio are starting to really struggle with knowing whether or not to get out now or whether to pass that property to their children, because it's just not going to give the yield that they want it. That's been a difficult decision to be made, particularly with the changes that are happening.

[00:04:01] Emily I think also if you look at stats, the number of buy to let investors have dropped continuously since I think 2016. But what you do find when you look into those stats more deeply is a lot of those landlords are older landlords that would have probably been retiring regardless of where the market is now, because they are hitting that stage in which they want to step up and fund their time.

[00:04:27] Phil Just thinking back through that, probably when I don't know, I'm guessing here, but by two that probably started about 30 years ago, did something like that. And a lot of people who got into the market at that time, as you say, they're now approaching retirement. So so the investment is done its job, it's now providing for retirement. But one of the the big recent changes, it's the rise in owning a property through a limited company. That was what I really wanted to talk to you both about. Let's just chat through if we could. The main advantages, as well as the disadvantages. I hear a lot about the disadvantages and the costs and associated sort of admin that goes with it. But bearing in mind who are audiences as mortgage brokers, what do they need to know about it and what should they be discussing with their clients?

[00:05:11] Emily So the biggest one that is the most well known is the, tax relief, better tax relief with it being a limited company because you can still use your mortgage interest as an expense, which can help with more profitability. So that's that's the one that everybody tends to know. Yeah. There are a couple of other areas that I feel maybe aren't discussed enough. One being, again, for those investors that are in it for the longer game. If they are planning to pass their portfolio down to children, it can help with, inheritance tax liability being reduced because it's held under a limited company rather than their own personal estate. So again, that's more suited for those and for the, for the longer term. And then the other one is when you do have a do, do it through a limited company, if you have another trading limited company that you, a director of, you can do something called an intercompany loan, which is when you buy a new property, rather than taking your deposit out of the trading business and paying the dividend tax on it, you do an intercompany loan between that and your limited company that you set up to buy property.

[00:06:18] Speaker 4 Okay.

[00:06:18] Emily So it's a really tax efficient way for those that do fit into that bracket. to to to to reinvest.

[00:06:28] Phil I mean they did people need advice. They did. They didn't because there's a lot to consider. Is there a particular sort of point or scale at which. At which time it makes more sense. Or are you advising new investors just to set it up via limited company anyway?

[00:06:44] Emily So higher rate taxpayers? It is always a conversation to be had for them to consider going down the limited company by two lakh rupees. Just the way it's taxed. Obviously 40% on, personal income, whereas you've got corporation tax on the limited company, which is lower. And going back to that first point, they can deduct the the mortgage interest. So higher rate taxpayers. Absolutely. Those that also if you were if you were basic rate taxpayer that your longer term game is to build a portfolio. It might be worthwhile doing the limited company from day dot. Yes, even though it might not benefit you now, it probably well later on in the future if you're getting a good enough return on those properties.

[00:07:28] Phil And if you had any or many clients already invested and transferring their investments into a company and therefore incurring all of this.

[00:07:40] Emily It's the stamp duty hit. So one is a conversation that's always had, I don't think a lot of people realise the stamp duty hit that comes along with that. So as soon as you mentioned that, right. So this is why I say it's really important for brokers to have that conversation early on about what the longer term game is.

[00:07:56] Gina Got it. Yeah, we have lots of inquiries about this. But the one thing that I can add, to the conversation is that the limited company is no different in terms of the legal requirements and the compliance issues relating to lettings and, you know, purchase of a part of that property. Yeah. So, you know, you're not going to be gaining anything. You're not going to be avoiding legislation by becoming a limited company. But you are certainly going to have some tax relief.

[00:08:25] Phil How about the disadvantages of of of investing for a limited company?

[00:08:30] Emily Again, number one point in that everybody seems to know is the fact that it comes with higher mortgage interest rates. Your list of lenders is limited. So not every buy to let lender is going to lend to you as a limited company.

[00:08:44] Phil So you can't do it. It's just less choice.

[00:08:45] Emily You can do it. It's not impossible. And there's a good there's a good appetite in a good market there for it. It's just you're dealing with a smaller pool of lenders.

[00:08:54] Phil Similar rates or just.

[00:08:55] Emily Higher.

[00:08:56] Phil Higher rates as higher.

[00:08:57] Emily Interest rates, usually higher fees and usually a more, difficult application process.

[00:09:02] Phil Okay. You're not selling it to me.

[00:09:04] Emily No. Well, this is the disadvantages. So that's.

[00:09:06] Phil Know.

[00:09:07] Gina That's the high risk element isn't it. Yeah. From a company because you don't know what assets it's got as such. And if you're simply setting it up from the start then there are no assets okay. So that's a higher risk.

[00:09:17] Phil So actually the lender has no real recourse.

[00:09:20] Gina No potentially not unlike those first early stages.

[00:09:23] Emily Yeah I do hope so that as years go on in this becomes more and more popular, which I'm I'm confident it well, that that that pool of lenders will. Yeah.

[00:09:33] Phil Expand I suppose it's all quite fresh at the moment isn't it. Yeah. Seeing how it goes, I presume there are higher admin costs and legal costs of actually running an enterprise.

[00:09:46] Emily Yeah. So you need to count in things like accountancy fees to keep your books going because you are limited company. Yeah. Product fees on the mortgages do tend to differ slightly to your main stream to let. So an increase there too.

[00:09:58] Phil And just one other question on on that topic. How about taking money out of a company if you if you've made some profits and you want to take them, you pay yourself a dividend. Is that the way.

[00:10:11] Emily Yeah you can do that. Yeah you can do that. Obviously standard tax implications for that dividend still comes into play. or as I kind of touched on earlier, you can build up profit within the business and reinvest that into another, property and get tax advice on how to do that with an intercompany loan.

[00:10:30] Phil So it's not for the faint hearted, it's for people who are doing it seriously and want to carry on doing it and have probably built up a few. But actually, for them, it's really good news.

[00:10:40] Emily It is. Yeah. And I do think that the standard landlord now in comparison to the standard landlords, I don't know, 20, 30 years ago that two completely different people, I think that there's more of an expectation for it to be a more difficult process now than it was back then, because things are just generally more difficult.

[00:10:58] Phil Back then when we had free money. Yeah, it is really it's like we had 110% mortgages. So it was.

[00:11:05] Emily Nice and easy.

[00:11:06] Phil And a market that probably climbed 10 or 20% a year. It was fairly easy pickings, but it.

[00:11:11] Emily Feels as if everything's against landlords at the moment. I do really feel for that market. They've got a dog and yeah.

[00:11:16] Phil But they provide such an important job in society and and an increasingly important job just because, the levels of rent and government housing or lack of lack of.

[00:11:29] Emily Yeah, definitely.

[00:11:29] Phil That's that's a topic for another day. And, Gina, could I come to you? Are there any other legal structures that landlords are exploring to own their properties? Are they thinking outside the box?

[00:11:42] Gina They certainly are looking at short term lets and whether holiday lets or a viable alternative. But again the tax implications for that are not necessarily stacking up in their favour. So it's all exploratory. We are getting a lot more landlords who are limited companies already. So they've already been down that process and realised that there are there are tax savings there. The other area actually, and this isn't this is one which is not regulated at the moment. It's called rent to rent. And that is causing, some big headaches, in and around letting but landlords are literally handing their, property over to a company usually.

[00:12:30] Phil Yes.

[00:12:31] Gina And then they effectively relinquish their control over that property by allowing the company to sublet it in whichever way they are.

[00:12:38] Phil I'm a landlord, actually. One of my properties is is via that kind of a structure.

[00:12:43] Gina And it can be brilliant. And there are actually agencies who work with that particular model and very successfully to. But you need that confidence in who you are handing over. Take on the plan for compliance purposes. Yes.

[00:12:56] Phil Renters reform. Well, that's I mean, I don't know where we are at the moment, but there's been a big focus on the no fault evictions being scrapped. But there's a lot more to it than that. Isn't that good? Can you give us just an overview of the bill? And I know it hasn't all come through yet, but but but where are we at at the moment? How will it impact landlords?

[00:13:16] Gina Has already impacted landlords. As soon as the headlines hit in the media with abolition of anything, it's likely to cause, a few raised eyebrows, to say the least. And this is, you know, a massive, massive change in 30. Years we haven't had huge housing or changes. We've had additional pieces of legislation, but not fundamental to the core where we're changing. We're removing a tenancy agreement, we're removing these short shorthold tenancy agreement because that's the only agreement that section 21 notices apply to. So that's got to go. We will have a series of periodic tenancies. So there's no no no fixed terms.

[00:13:53] Phil And just talk us through that. What's a periodic.

[00:13:56] Gina Deal. well you can set one up already. So this is not new, but a periodic tenancy simply means that it will run on a period of rent. So if you set it at monthly, which, unfortunately, the renters reform bill is going to insist on monthly rent only. So it's going to be a month by month by month periodic tenancy. Now that means, currently that if you have a periodic tenancy and we do get them because they automatically become periodic tenancies after a fixed term.

[00:14:28] Phil Yeah.

[00:14:28] Gina You get this scenario where either landlord or the tenant can give notice at any point that they are going to extend the notice period for tenants to two months. They're going to have to give two months. At the moment it's reasonable notice there's nothing in statute which requires them to give any specific notice, period. Like the landlords who have to give two. Yeah. So that's a big, big change for the way in which landlords handle security because it feels like it's being removed and not given. And anything that's been removed is obviously it feels difficult for landlords. Yeah. The section 21 notice is fundamental in the sense of that is the notice, which is no fault. There's.

[00:15:12] Phil No landlord change them on.

[00:15:14] Gina Yes. It sounds like, landlords are just using these notices for, you know, just any reason at all or no reason as it's set up. But in fact, we only see the bad cases, in, in my department, you know, we're only seeing those where they've got problems, and usually it's linked to rent arrears, rent or something similar. And, you know, landlords are struggling to meet the yields anyway. So they've got a tenant is not paying as well. And then things become very difficult. But they, it's, it's made out to be something which shouldn't be used. Perhaps, you know, it's it's not providing tenants with any confidence in taking a rental property because at any point it's not quite that. But at any point the landlord could seven notice and they could be having to move. But this has been the main change for landlords. If that's going to be removed, how are they going to get their property back? How are they going to, you know, realise that their investment, if they have very specific needs, it could be their own, family member, you know, perhaps a parent needs care and they need that capital funds as an injection. There could be some really, really appropriate times for section 20 ones to be used. And tenants do get notice that is going to have to happen. And often landlords will work with tenants, and ensure that they are aware that they are going to have to start looking for a property. The biggest problem right now is that the rents are so high. There are so many tenants going for each and every property. And agents are under huge pressure to, to try and work out who to give the fuming to.

[00:16:54] Phil Yes. I mean, we don't know yet when the renters reform bill will be introduced and and in what capacity it will come. But of course we've we've got a general election to look forward to, and I'm sure that will be in people's minds as well. Gina, what would you say brokers need to think about when the when they're helping clients with buy to let mortgages in 2024. What's what where should their advice be aiming towards?

[00:17:20] Gina I think this is this runs a direct parallel with what property professionals are having to tell their landlords to try and prevent them from removing themselves from the market. It's it's that kind of advice really, as to what brokers should be doing. They obviously will need to know the key aspects of the bill, particularly if there are any increases in cost, because with the yields at the moment, with high housing prices as well as high interest rates, they don't want any additional costs. So in actual fact, the biggest relief for landlords came not from the renters reform bill, but when there was an announcement that the minimum energy efficiency standard was changing yes, from level A to C that was being scrapped, and that was the best news that could have come for landlords at that moment. Yeah, I don't think we're out of the woods. We have a big target as a, as a, as the UK and globally to, to get carbon emissions down. And House is one of the worst. And that doesn't matter whether they're rented or whether we own them. So that was a relief. at.

[00:18:27] Phil Least.

[00:18:27] Gina Instantly. Yes, exactly.

[00:18:29] Phil And it was the uncertainty around that because it wasn't clear.

[00:18:32] Gina No.

[00:18:33] Phil So that was that was relieved. A lot of landlords took a took a big sigh, indeed.

[00:18:38] Gina But I don't think there's anything that, the investment world should be scared of. I think this is a really this is a really positive step for certainly for new landlords and who want to start their a business in this area.

[00:18:49] Phil If family sets them up correctly from the outset, let's.

[00:18:52] Emily Give it a go.

[00:18:53] Phil Yeah. And Emily, any final thoughts from you about the year ahead and what it might look like for brokers and what they should be talking to their clients about?

[00:19:02] Emily I think that brokers need to know enough about the limited company roots in order to educate their clients of this, too. Whilst those that are in the market might have the knowledge, those that are new into the market may not. So yeah, educating the clients of this, of this option, but also thinking about what their longer term plans are, because while she may be advising on something that's right for them now, without knowing what their longer term goals are, that might not be appropriate for them later on down the line.

[00:19:31] Phil Got it. Thank you. I mean, I tell you so often I sit with people on this podcast and the real theme is knowing your clients and understand your clients and having a an ongoing relationship with them. And it's via that, that you can give them advice and they can benefit from it.

[00:19:46] Emily Absolutely.

[00:19:47] Phil So key communication and developing that relationship over years.

[00:19:52] Emily I believe that when you have a good a client, it's not just a one time transaction is something that you continually service, whether that's every year, two years, five years. So you need to be thinking in the longer game for this.

[00:20:04] Phil But of course, you've also got to go out and win new clients and then start developing that relationship really quickly.

[00:20:10] Emily All part of the game. Oh.

[00:20:11] Phil Well best of luck to both. Great to have you on. Thank you so much.

[00:20:15] Gina Thank you. So.

[00:20:17] Phil That was Emily Maze of the mortgage stuff. And Gina Peters of Dutton Gregory. The views expressed by external guests in this podcast are their opinions only, and do not necessarily reflect the views of Barclays. Thanks for listening to Mortgage Insider. I'm Phil Spencer and this has been a fresh air production for Barclays. Please rate, review and follow the podcast on Apple, Spotify or wherever you get your podcasts.

[00:00:00] PHIL: Hi, Phil Spencer here. And this is Mortgage Insider from Barclays, the podcast series for mortgage brokers, property expert, and sometime TV presenter. And every fortnight, I'll use my experience to get to the heart of the biggest issues in the mortgage sector. I'll be joined along the way by industry leaders, brokers, and indeed Barclays own experts who will share their insight and expertise to help you navigate the challenges.

[00:00:31] Changes and opportunities in the world of property. Help to Buy, the scheme that helped buyers purchase a new build home, came to an end in March. But getting on the housing ladder remains incredibly difficult for many. And in an earlier episode, we looked at some of the mortgage options that Barclays offers.

[00:00:51] But we wanted to find out more about the government backed and private schemes that are available to help first time buyers. And to find out what brokers need to know about these schemes. So I'm really pleased today to be joined by Mobeen Akram who is new homes director at the Mortgage Advice Bureau.

[00:01:08] Mobeen, good to have you with us. Thank you. very much for having me. And Mitch Atkins, director at Michael Usher Mortgage Services. Hi Mitch. Hi Phil, how are you doing? Oh good. Yeah, really keen to sort of unpick this because it's a it's a complicated topic. But if we can start with help to buy and sort of reflect on it a bit.

[00:01:25] Why was it introduced? When did it start? And of course it's ended now. Or has it, in fact, has it all completely ended? Where, where are we

[00:01:32] MITCH: at? Well, um, well, let's take you back. Yeah. So I believe it started back in 2013 from memory. That's a long time ago to think back to that. I actually have helped to buy myself, so it has certainly helped.

[00:01:44] A number of people in the UK to get onto that ladder. Just what was the initial purpose? The initial purpose was to essentially help developers, I believe, uh, to get these houses built and sold, but also the 5 percent deposit from clients, uh, from applicants, um, who haven't got that large 30, pounds deposit, uh, with the government helping with a 20 percent equity loan.

[00:02:09] PHIL: Got it. And I mean, am I right thinking? I mean, it has ended, but I read somewhere that actually it's still functioning in Wales. Is that right?

[00:02:18] MOBEEN: Absolutely. So, I mean, just back to your initial question about why help to buy, it's been incredibly successful. So it's helped more than a quarter of a million people to buy a home.

[00:02:28] Ultimately, it's helped people who couldn't afford to buy a property with a little 5 percent deposit have a 20 percent interest free loan funded by the government. So. It helps your loan to value, I guess. And it's helped many people, whether you're a home mover or whether you're a first time buyer, get onto the property ladder.

[00:02:46] And if you're a home mover, get a bigger property if your personal circumstances have changed. So it's been incredibly successful and it's helped a lot of people. So in Scotland, Helped Buy finished, I can't remember the exact date, but, um, I've been out of Edinburgh for a few years and it was before then.

[00:03:02] And, um, the market is still resilient. People are still moving. So it. was withdrawn from Scotland. However, it's still active in Wales and it is still active in Wales. That's right. And I understand it's still active. However, it's a completely different market, isn't it? Because the purchase price far more affordable.

[00:03:19] So I think the cap, the purchase price cap is 300, 000. And

[00:03:24] PHIL: did it just run its course? Why did it end?

[00:03:28] MOBEEN: It's a great question. Why did it

[00:03:29] MITCH: end? Why did it end? Do you know what I've,

[00:03:32] MOBEEN: it's been, I think help to buy has been inflationary. It's not, I think from a government perspective, it has driven or contributed towards house prices.

[00:03:40] So I think it's probably quite political that it has been inflationary because it has been helpful. And I guess it's not just help to buy when you had the stamp duty discount, then he had the pent up demand during COVID. So I think there were a lot of factors that contributed towards inflation as we know.

[00:03:59] But I think help to buy hasn't been popular politically because it has been inflationary. It's

[00:04:05] PHIL: strange, isn't it? Because when it was launched, you say, Mitch, was it 2013? Yes. But you know, we all celebrated and continue to celebrate anything that helps first time buyers get on the ladder. We fantastic applaud it, but actually it's probably gone

[00:04:18] MITCH: too far.

[00:04:18] That 2013 scheme was actually open to everyone. Um, it was only 2021. I believe they changed it to first time buyers only. But then there's other schemes that have come in since then. Yeah. Well, let's talk

[00:04:31] PHIL: about. some of those schemes. What's available now that specifically relate to new builds?

[00:04:36] MOBEEN: From a new, so from a new homes perspective, there are options out there.

[00:04:40] You, of course, have the First Home Scheme, which is 30 percent discounted of the purchase price. So if you are somebody who's eligible, sorry, what did you call it? First Home Scheme. First Home Scheme. So it's, it's funded by Homes England, whereby you, if you're eligible for the scheme. So if you're a key worker or personal living in local vicinity, you get a discount of 30 percent of the gross purchase price.

[00:05:04] So you have to be eligible though. The issue, I guess, with the scheme, although it has been popular and it has been a success, it is limited to who can actually qualify. for the scheme. So homes England plush, you know, 10, 000 homes. Um, and it has been successful as an option, but it's not helped by, and it was never meant to be helped by.

[00:05:24] So you've got the first time scheme, which is good. And it's, it's delivered what it was meant to deliver. You've also got shared ownership, which I think Mitch is going to cover it in a moment. But in addition, you've got 95 percent loan to value products On a new build. So you've got the HBF product, which is deposit unlock, which means from a customer perspective, you get to buy a new bill property with only 5 percent deposit.

[00:05:47] And of course you've got a new as well, which are they're both good options. No, they're actually private. So they are private schemes that are available, but it allows a customer to buy a property of 95%. And the key difference would be with help to buy, for example, the customer puts in 5%. But then you get 20 percent interest free loan, which will reduce your loan to value, whereas a deposit on Lock and Own New, the affordability still remains a concern because not everyone can qualify for that 95 percent loan to value.

[00:06:17] However, on the same aspect, you know, you're being able to buy it probably with a lower deposit as well. Um, but

[00:06:24] PHIL: you've, sorry. Both those schemes only. possible on new builds.

[00:06:29] MOBEEN: So I think with, um, deposit unlock. Yes, it's specifically for new build properties with own you. It's available on second hand as well.

[00:06:37] But there also are other lenders who are innovative. For example, you've got generation home who offering joint borrower sole proprietor where you can have family and other other members help. So there are options out there. But I guess from first time buyer perspective, it's difficult because inflation has Driven up house prices, lenders are tied to policy and criteria, affordability is a concern.

[00:07:01] It's tough, it's tough. It's really hard, it's hard for a first time

[00:07:03] PHIL: buyer. Mitch, how about some of the other schemes that are around at the moment? Right to buys and lifetime ISAs and things.

[00:07:11] MITCH: Yeah, I mean, right to buy has been around for a long time. And actually, it's probably less frequent nowadays because you, you have to, uh, have been in, uh, affordable housing, council housing for, for a number of years.

[00:07:24] Are people still qualified? Yes, they are. Um, I think we're seeing still inquiries mainly from the, the outskirts of central London. There's not as much of it around and it's not necessarily. Geared to those first time buyers more of those people that have been in rented for for a number of years and at that opportunity What about lifetime?

[00:07:42] Lifetime ISA, yeah So it's interesting this one because it was a bit of an upgrade on the the help to buy ISA in the fact that you Can buy up to I believe 450, 000 pounds. It's actually limited in the fact that you can only put 4, 000 pounds A year into this, uh, this, uh, lifetime ISA, but the 25 percent bonus on top, uh, as well as getting interest paid annually as well, monthly, however they pay it, it's actually a good way to save.

[00:08:07] If it's not for a first time, uh, yeah, I mean, you can use it for later life savings as well. All the interest, the funds itself in the ISA, it's a tax free wrapper. So it's got to be good news. Yeah, absolutely. And if I think we worked out the other day that if you paid into it. Uh, from the age of 18 up until you were 50, you'd have something like 160, 000 in that ISA, which is a, is a great asset for, for later life if you're not going to use it for your, your first purchase.

[00:08:35] So it's, it's a double scheme, but it doesn't necessarily, it's not a, it's not a silver bullet so to speak for, for, for the industry.

[00:08:42] PHIL: Can I ask you both what you make of shared ownership schemes? And I know there's lots of different schemes and people need to read the detail and understand what they're getting into.

[00:08:50] But generally, what do you make of them?

[00:08:52] MOBEEN: Shared ownership is an option for first time buyers. And I think if we have as many options as we can. That's great. Given the current climate, the volatility, uh, economically. So I think it's a great way for first time buyers to get onto the property ladder. I think we're in this country, we still want to be homeowners.

[00:09:12] So I think there is a bit of a stigma attached to shared ownership that, okay, you don't fully own your property. And I think the customer demand is still, um, that we should own our property that right. But I do think because

[00:09:24] PHIL: actually the bank owns

[00:09:25] MITCH: them.

[00:09:29] MOBEEN: But I, I think it's a great option for a customer and um, it now allows you to get onto the property land and we've seen an increasing amount of shared ownership options come on to, um, come on to the market.

[00:09:41] Absolutely. And it's been increasing as the new homes market in particular sales have reduced across some builders. We're seeing more and more shared ownership with housing associations and JVs with house builders.

[00:09:55] PHIL: If nothing else, it gives people control. It gives them, you know, they can't be kicked out.

[00:10:00] It is their home. Absolutely.

[00:10:02] MITCH: I think as well, the scheme is there for people that, uh, a young family for example, don't really want to be in that one, two bed flat. They can't afford to make that jump to a two, three bed house. Uh, they want the garden, they want that extra space for work from home, et cetera.

[00:10:18] It gives them that facility to own a home. purchase price with a discount on, um, I believe it starts from 25 percent in most cases. Um, but yeah, I absolutely echo what you've just said. I think if there is more schemes available for first time buyers, that's only beneficial to the market and keeps that, that housing market moving.

[00:10:37] And we

[00:10:37] MOBEEN: need more of that, especially, I mean, if you're looking, living in Southeast, it's so unaffordable, so it helps, shared ownership is an option where you've, if you've got a lower loan to value. Um, it allows you to buy a property, which you couldn't normally do. What about the

[00:10:51] PHIL: regional picture? Is it, is it different for different parts of the country?

[00:10:55] Or are there different schemes that are more popular in the north or south or? Yeah,

[00:10:59] MITCH: I think the regions that are naturally more expensive. will exercise these schemes far more. Um, if, if houses are more affordable in certain regions, then you're going to see less of a take up on these, on these schemes.

[00:11:13] The

[00:11:13] MOBEEN: issue with the regional picture is each local authority and scheme has different regulation than rules. So we need a bit of uniformity across that, which was great that helped by that it was pretty uniform to who qualifies for it. So the regional picture does vary. a because some properties are more affordable than other areas that we found the Northwest in particular, Yorkshire ticking over into the property sales in particular for new homes, because they do remain more affordable when we mentioned Scotland earlier in comparison to the southeast.

[00:11:45] But in relation to schemes, I mean, the first time scheme has been, um, you know, popular within certain regions. However. We need uniformity of when these schemes are available in different regions. Yeah. They vary. Yes. According to who the local authority is. And then they have their own. We need a bit more

[00:12:03] PHIL: clarity.

[00:12:04] And sort of consistency. Absolutely. Well, actually, people need a good broker, don't they? Absolutely. And then, and then all, all problems

[00:12:11] MOBEEN: disappear. Absolutely. And you need a, you need a broker who will look at every option and exhaust every option for that customer.

[00:12:19] PHIL: I've got a stat for you, that houses currently cost 8.

[00:12:23] 3 times the average full time salary in England. That's just

[00:12:28] MITCH: unbelievable. I think as well, I think, if you're talking Um, with the Southeast in general, uh, a lot of the first time buyers are into their late thirties in instances, unless they have help from the bank of mum and dad or other schemes such as joint borrower sole proprietor.

[00:12:44] Talk us through that one. So yeah, so it's a really long, uh, title, isn't it? Joint borrower sole proprietor. So when we speak to clients about this, they go, what, what's that? Um, it's essentially the old school guarantor kind of mortgage, uh, but with a ring fence around stamp duty. So mum or dad's family member want to.

[00:13:01] To help, uh, their, their children, uh, instead of going for that flat, they want to go for the house and all we're looking at young professionals that know they're going to be earning more money. The more years they're in their, their job for essentially allows us to use additional income from parents as such to boost the affordability, uh, and get a more, uh, get more on the, on the lending.

[00:13:23] I remember seeing

[00:13:23] PHIL: a statistic a while ago that bank of mom and dad was like the 10th biggest lender in the country. I don't know if that's still the case or not. I would kind of presume it is, but are there. Are there sort of formal schemes where families can help?

[00:13:37] MITCH: Yes, um, yeah, you're right, the, the, the bank of my mum and dad is, is still very much prevalent in, in uh, first time buyers trying to get onto that market.

[00:13:45] Yeah. With purchase prices the way they are at the moment, especially towards the south, uh, when, where prices are, are When it comes to help from, from family, you have got the joint proprietor, which we've mentioned before about, um, being named on the mortgage, but not on the deeds. So that boosts the affordability, uh, that ring fences them.

[00:14:05] So the stamp duty rules are. Uh, I'm not punishing them for helping family. You've also got a springboard mortgage, which allows to

[00:14:14] PHIL: talk us through that one. So that's something intergenerational.

[00:14:16] MITCH: Is it? Absolutely. Yeah. So, so parents, rather than gifting money and the gift usually can come from savings or even money raised from their own remortgage as such, but this money sometimes doesn't want to be gifted.

[00:14:29] They'll need that for later life or to pay back down their mortgage in the future. So what they'll do is they'll lock that into a savings account with a lender. And the, the savings will attract interest, uh, but also it's locked away. They can't touch it. They can't touch it. They're not able to touch it for let's say five years and a five year fixed.

[00:14:47] So essentially the, the lender will offset that as a deposit, uh, for the, for the first time buyers. Over a five year period, there should be enough equity in the home for paying down that mortgage to then refinance them onto a new product.

[00:15:01] PHIL: And should the, the owner of the property default on their mortgage, then the lender has access to that deposit?

[00:15:08] That's,

[00:15:08] MITCH: yeah, that's, that's their, that's their collateral, as such. I mean, it, it,

[00:15:11] PHIL: it sounds creative. And, and I actually, talking to you guys, it, it does feel that the mortgage market Is creative and they are coming up with new schemes all the time. I guess it keeps you guys on your toes, um, but, but also it means that it's quite tough for consumers because there are permanently new and different things evolving.

[00:15:29] MITCH: I don't think we can say that the lenders are not doing enough. They are, they are inventive, they're creating things. There's even a springboard offset now, which allows, uh, the interest to be offset in the savings account from the money that parents have given and offset that against the interest. That the, uh, the applicants are paying.

[00:15:45] You lost me there, man. Yeah. Yeah, but it's, it's a really innovative scheme. So I just think we need a bit more support from maybe government level with, with possibly stamp duty incentives for first time buyers. I know we've got the one up to 425, 000, I think it is, but it's, it, there's, there's other things that we can be, they can be doing.

[00:16:09] Mubeen,

[00:16:09] how

[00:16:10] PHIL: do you see things? What's happening now? What should brokers be expecting?

[00:16:15] MOBEEN: That's a really good question, but it's also a very tough question. It's positive to see that lenders have already taken into account, um, Bank of England base rate hikes and the current swap rates are lower. Than the Bank of England base rate.

[00:16:30] So although we can't mention any rates per se, it's good to know or, or hopefully foresee that, um, rates have bottomed out and hopefully we can see, um, mortgage lender continue to reduce mortgage rates. Yeah. And obviously there was a. Conversation or consideration from the government about stamp duty potential changes coming in.

[00:16:54] So it's good to see what would happen in that respect as well.

[00:16:57] PHIL: You're sounding quite positive. That's good. You're giving us comfort.

[00:17:01] MITCH: I think we're starting to see a bit of stability in the market, which we've not had for a long time with inflation. Kind of stabilizing and it's not peak. We actually have hopefully hit that peak and we're seeing those rates Consistently stay at the same level.

[00:17:19] We're not seeing rates changing three times in a week Which is absolutely crazy. I think the stability is key to people moving again. Yes home first time buyers Pulling the trigger which then yes Enables the other people to move to the next property and people hate

[00:17:36] PHIL: making these big decisions It when when there's any uncertainty, of course, we've got an election coming so that I know we'll have a little just a little bit of a moment

[00:17:46] MOBEEN: It could actually be a worse time because it is what it is.

[00:17:50] We can't do anything about it. But I would echo what Mitch said in terms of stability. Um, for sure. When you see mortgage rates, they have stabled. The only thing I would say as a broker would be it's so important to nurture our customers just now keeping in touch with them. And it's not necessarily don't do anything.

[00:18:07] We need to help people continue to buy, continue to move the market and rates, like you mentioned, have stabilized. Yeah. It is still a time to, to buy a property. If you can afford to buy a property, if you can afford to buy, it's still a time to buy a property.

[00:18:20] PHIL: Wise words by Mabine. Thank you, Mitch. Any final thoughts?

[00:18:24] MITCH: Um, yeah, I just think we, it's such a confusing market for us as, as brokers. Um, you can imagine how confusing this is for the consumer, which is our, which is our client. Yeah, it is. A minefield. So we can't assume that everyone knows as much as we do. Um, I know we're supposed to be the experts and it's, it's tough for us.

[00:18:45] So, uh, communicate as much as you possibly can to, to your clients, your existing clients, as well as new ones. Yeah. Uh, the types of schemes available, the types of advice. is different for every person that comes through that door or who is on that call. You've got to keep

[00:18:57] PHIL: yourself ahead because, because it's a, it's a sort of moving feast, isn't it?

[00:19:02] All the advice and the regulations as well as all the products

[00:19:06] MOBEEN: and the schemes. Absolutely. And I think nurturing customers, especially first time buyers is vital, regardless of when they buy a property, nurturing them, guiding them, holding their hands through the current market. Um, I don't think it's ever been more of an important time for

[00:19:20] PHIL: first time buyers.

[00:19:21] Would you say there are any trends or things coming down the pipeline that are going to replace help to buy?

[00:19:27] MOBEEN: That's a great question, isn't it? I think help to buy has been so incredibly popular for various reasons that we mentioned before, to fill that void is really tough because there's nothing really quite out there that fits customer in terms of the deposit requirements and loan to value and affordability, really.

[00:19:48] There are options out there which we, which we have discussed but right now is there anything that completely fills that void?

[00:19:55] PHIL: Well I mean maybe that's why it's come to an end because it's done its

[00:19:58] MITCH: job. It's done its job but I think there's also more it could have done. I think it has pushed people back into the second hand market, the second ownership markets.

[00:20:11] We are still finding it challenging though, because the affordability rules and the rates are so high at this moment in time that nothing has really plugged that gap. So there is essentially even more of a need, I would say now. Then there was two, three years ago when the scheme was in place,

[00:20:27] MOBEEN: I think with help to buy for new homes properties, it's been incredibly successful as we know what we do need going forward is lenders to take into consideration when a customer is buying a new home's property, take into account that they are buying a newbie property, which is more cost efficient to run in comparison, in comparison to a second hand property.

[00:20:47] So we have stats on the HBF, which confirms that

[00:20:50] PHIL: final question, if I may, um, In Japan, they have, don't they have hundred year mortgages so that proper, properly is generational lending. Are we ever going to get that?

[00:21:01] MITCH: I don't think so. I don't think we'll go anywhere near that. I don't think the regulators would, would allow such a thing.

[00:21:07] I think there's a lot of, um, discussions with consumer duty at the moment as to keep preventing the client from foreseeable harm. And to offer someone a 100 year mortgage and then pass that debt on to their children, I just don't think that would, uh, would fly with the FCA at this moment in time.

[00:21:24] PHIL: Well, Mitch, Mabeen, great to have you.

[00:21:26] Thank you so much for coming in. The views expressed by external guests in this podcast are their opinions only and do not necessarily reflect the views of Barclays. And just to point out, we recorded this episode on the 24th of October before the autumn statement and the latest Bank of England base rate decision.

[00:21:45] Thanks for listening to Mortgage Insider. I'm Phil Spencer, and this has been a fresh air production for Barclays. Please do rate, review and follow wherever you get your podcasts. Talk to you next time.