Birmingham Midshires is feeling pretty proud of itself as, three weeks before regulation, it had its key features information ready for brokers to view and trial.
Head of product strategy Steve Sandiford says: “We have been planning for this for two years. Essentially, everything had to go online and the sheer complexity of getting ready had to take this long but we are ready to go.”
One of the main issues with KFIs is to make it easier to submit changes when, for example, a client remortgages or changes circumstances.
Another issue affecting the construction of KFIs is the declaration of fees payable.
HBOS will declare all commission payments and parties. Sandiford says Kensington Mortgages recently announ-ced it will not disclose the fee to a pure packager as they fall outside the regulatory regime but he says: “In the spirit of regulation and transparency, we will declare all commission. That is what regulation is all about, isn't it?” BM says the regulatory environment will mean more protection for consumers and a more professional and efficient service from both brokers and lenders.
BM, which became part of the Halifax Group in April 1999, retains its brand, branches and product ranges while drawing on the resources and market experience of its parent. Sandiford says he is uncertain whether this would have chan-ged if HBOS had acquired Abbey but be believes that there will be further consolidation in the UK mortgage market in the near future.
He says there are too many lenders chasing a finite market and the oncoming regulation will certainly hasten consolidation. He says: “On the distribution side, a lot of brokers and networks will face consolidation in the next 18 months.”
But BM's position seems safe under the HBOS umb-rella. BM's mortgage specialist areas include buy to let, sub-prime and self-certification. It employs over 2,000 people and manages assets of over £11bn.
BM says its philosophy on sub-prime lending is to bring transparency and fairness in a field where some customers are being exploited. Sandiford says: “We see a lot of abuses in the sub-prime market, with extortionate product prices and big fees for brokers.”
BM has standardised its procuration fees rather than use a sliding scale, as some lenders do, where the fee is directly related to the risk. It feels it cannot justify charging higher fees for higher risk.
Sandiford says some brokers have the incentive to work with lenders which provide higher fees for dealing with clients who pose a more substantial financial risk. He believes it is just a matter of time until the FSA picks up on this subject and confronts lenders.
Another growth area for BM is the BTL market. After the boom in this market, some economists have expressed concern that the property bubble may burst. As house prices have levelled and the Bank of England base rate has risen, the BTL market may not have the same attraction but BM is convinced that BTL is here to stay.
This sentiment is echoed by Paragon Mortgages chief executive Nigel Terrington, who says: “With the poor performance of other assets and the 2006 pension rules allowing inclusion of residential property in Sipps, there is real potential for long-term growth prospects.”
Sandiford says over the last few years, BTL has become an integral part of financial planning. “It is a happy coincidence that the rise of this sector coincided with the scandal of pensions,” he says.
BM's BTL customers are described as those who understand the long-term capabilities of a cyclical market. Acc-ording to 2003 market share figures from the Council of Mortgage Lenders, BM is the biggest BTL lender in the UK.
Director of mortgages Michael Bolton says online propositions from brokers in the last year have been BM's greatest hit and its one-minute mortgage is hugely popular. BM says 90 per cent of its broker business is placed online.
Sandiford says Bolton is “a good leader and visionary, with great clarity of thought”.
BM now waits to see what regulation will bring. Sandiford says: “We have seen some lenders take their foot off the gas because of regulation and rate changes but we will certainly see people come back in taking some of the market share after regulation.”