As part of the lead-up to the implementation of the FCA’s Consumer Duty, Mortgage Strategy thought it prudent to sit down with the Association of Mortgage Intermediaries’ (Ami) chief executive, Robert Sinclair, to discuss the new rules — alongside a host of other topics affecting the mortgage broker world.
To kick things off, we put it to Sinclair that the press (except us, of course) had recently been somewhat pessimistic about housing, and we asked if he shared this view. It was immediately apparent he did not.
For example, he agrees with the Office for Budget Responsibility that inflation is likely to drop to below 5% by the end of this year, citing inflation-driving energy prices settling down within that time span, which would therefore quicken the fall in mortgage rates we are already seeing.
The new rules demand processes that are no different from where we’ve been for the past 15 years
Regarding property, Sinclair says: “Asking prices are coming off a bit, but the general consensus is that we’re not going to fall below prices prevalent at the start of 2022.”
He continues: “All the numbers I’m looking at in sourcing systems tell me that not only are we seeing high levels of upfront enquiries but we are seeing pretty high levels of ESIS [European Standardised Information Sheet] production across the board as well. And it’s really ESIS production that tells you whether you’re getting close to the point of having conversations with customers, where the lenders are looking to get an application sent in.”
Pushing products
Brokers, Sinclair says, should prepare for a busy second half of the year.
He adds: “If nothing changes economically or structurally in the world, we’re going to find that a number of lenders are behind target and will be pushing products out at a significant rate.”
Smaller firms should be able to achieve good equality across gender
In this case, he explains, the challenge for the industry won’t be lenders meeting customer demand but dealing with a market that “might not be quite as responsive”.
Sinclair adds that the increase in the cost of living that the UK is experiencing is likely to worsen over the next two years.
“We’re going to have to be much more agile in helping clients deal with that.”
Green future
The most talked-about primary colour of the past few years has surely been green — and this particular hue inevitably comes up in our conversation.
The UK emits around 1% of global carbon emissions each year; which, although seeming insignificant, doesn’t mean we shouldn’t try to get the figure down “to the right place,” says Sinclair.
We don’t have good enough recruitment lists, and I don’t think we’ve got the best process to help people grow
He continues: “Unless we get this right by 2050, we are going to be in a position where the bulk of East Anglia and most of the Thames estuaries are under water…. I won’t be here to see it, but the chances are my children and grandchildren will be.”
The wider ‘net zero’ project is certainly a challenge, Sinclair says, with more-polluting market sectors still not committed to lowering their levels of emissions. Nonetheless, he is excited about the future.
“I think of how technology has moved on in the past 30 years,” he says. “I would hope to see things come to market in the next 30 years that will make some of this less difficult.”
When asked if this is something that mortgage brokers should concern themselves with, Sinclair says he understands the sentiment “but the issue here is that, if you don’t get on the bus, you might go under it”.
Bringing a broader population into mortgages will reflect the changing population of our society
He explains: “Clients will come to us with questions because there are only two people they will talk to about their house and their mortgage: the estate agent and the mortgage broker.”
It will be incumbent on the latter to have an understanding of retrofitting, green finance and energy efficiency, he adds.
He recently saw property TV megastar Phil Spencer highlight energy performance certificates (EPCs) as he talked about properties.
“And this will happen more and more as we go through the next decade. The EPC will become a bigger part of Rightmove and Zoopla. It will become a bigger part of the relevant information that the estate agent has to show and explain to people, and therefore the broker needs to be able to talk about these things.
“If they don’t have that knowledge and understanding, they will get left behind.”
An industry for everybody?
Another subject on the lips of many people is that of ‘diversity and inclusion’. Sinclair immediately brings up the report on this topic that Ami released in October 2021, which he says some in the sector described as “ripping off a plaster in terms of some of the issues we see in this marketplace — particularly around the behaviour of some men in our industry towards some women in our industry.”
He says there is work to be done to get the mortgage world into a “better place”, adding that this applies to society as a whole as people struggle to come to terms with a world that is rapidly changing.
Unless we get net zero right by 2050, we are going to be in a position where the bulk of East Anglia and most of the Thames estuaries are under water
“For me there are three things that really drive this. First, all the evidence says that firms that have a more diverse workforce — in terms of both type and thinking — become more profitable and happier places.
“Second, bringing a broader population into mortgages will reflect the changing population of our society. If we don’t have the right population within the industry, it won’t map to the people we’re selling to.
“And third,” which Sinclair cites as the most important point for him, “it’s just the right thing to do.”
He believes the mortgage sector is a meritocracy, “but one based on a difficult starting line…. We don’t have good enough recruitment lists, and I don’t think we’ve got the best process to help people grow.”
The consensus is that we’re not going to fall below house prices prevalent at the start of 2022
He adds that as part of his research he has found that the mortgage sector contains “genuinely exceptional people who don’t feel they belong”.
Ami, he says, is in the process of setting up a website that will help address this and assist in enabling people to work together as mentors and mentees. It is also creating workshop programmes to tackle this issue.
Bringing in the regulator
We put it to Sinclair that, as with all social issues, bringing in the regulator can prove controversial.
“I think the regulator has a role in helping make sure that the industry in its broadest sense is measured against this; in pointing out where it sees best practice, and what this best practice is,” he replies.
If you don’t get on the green finance bus, you might go under it
“Whether it should take action is an interesting one. We already have rules coming in within the next few weeks for the boards of major organisations. That’s going to be testing for some firms.
“How far the regulator extends that down the value chain in terms of capital is difficult, I think, because big firms should be able to deliver this. For smaller firms it is much more difficult — particularly if they are working in catchment areas where there is not a great degree of ethnic divergence — but they should be able to achieve good equality across gender,” he concludes.
Back to the first duty
It occurs to us that some of the topics we have been discussing, while important, are rather abstract and far off.
We’ll have to be much more agile in helping clients deal with the cost of living
A subject with more immediate impact — perhaps too immediate, in the eyes of some — can only be the Consumer Duty. The main question is, of course, that of readiness.
Sinclair believes the mortgage broker world is prepared for the new rules that will come into effect at the end of July. In fact, he says, “on an individual basis I think we’re already way ahead of most other parts of the financial services marketplace”.
The rules demand processes that are “no different from where we’ve been for the past 15 years”, he adds. It’s more that brokers must ensure “any documentation we give [to clients] is clear and not misleading, and is written in simple language we can ensure they understand”.
He elaborates: “We need to make sure the client understands what it is they’ve bought and why they’ve bought it. We have to think less about a satisfaction rating, but instead ask, ‘Did you understand what you bought and why you bought it, and did we meet your expectations in relation to ensuring you understood what you bought and why you bought it?”
The EPC will become a bigger part of Rightmove and Zoopla
Sinclair reiterates: “And that isn’t much different from where we’ve been for a very long time. It’s just about sharpening the pencil and making sure we record all of this in a way that the regulator can see.”
The end of last year proved tough for the industry, but it pushed through. This year, while calmer in many ways, has so far brought a slalom course consisting of gloomy sentiment and the administrative headache of upcoming regulatory change.
Sinclair, however, sitting at the vanguard of the industry, is unfailingly positive about its future. He could set no better tone for everybody reading this.
This article featured in the May 2023 edition of MS.
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