Monthly Archives: December 2016

Compliance Update

Private Medical Insurance

As the year draws to a close we are turning our attention to a number of tasks that I have been looking to complete from my wish list, one of which is a sales process and guidance for Private Medical Insurance.

Our already overstretched hospitals come under increasing pressure over the winter period, particularly at Christmas when waiting lists begin to grow. What better gift is there for your customers than the chance to discuss private healthcare options early in the new year?! Look out for the guidance, fact find and suitability letter options for PMI next week.

image of Gavin Earnshaw


Weekly Round-up: 16th December 2016

Keep on lending

The Council of Mortgage Lenders (CML) has published its latest mortgage lending forecasts reporting gross lending of £21 billion in November – up by an estimated 3% on October, and also 3% up on a year ago.

The CML’s lending forecasts for 2017 have been revised downwards from the previous expectations of a year ago, reflecting economic uncertainties as well as new tax burdens and regulatory changes in the housing and mortgage markets. The CML now expects gross lending of £248 billion in 2017 and £252 billion in 2018, with net lending of £30 billion in each of those years.

According to the CML, the mortgage market remains resilient but is likely to plateau rather than grow much for the next couple of years, whilst property transactions look set to drift down slightly. The trade body does not expect house prices to fall, with net lending unlikely to get above £30 billion next year.

House Price

In its latest review of the housing market, the Office for National Statistics has suggested average house prices in the UK have increased by 6.9% in the year to October 2016 (down from 7.0% in the year to September 2016), continuing the strong growth seen since the end of 2013.

The average UK house price was £217,000 in October 2016. This is £14,000 higher than in October 2015 and unchanged from last month. The main contribution to the increase in UK house prices came from England, where house prices increased by 7.4% over the year to October 2016, with the average price in England now £233,000. Wales saw house prices increase by 4.4% over the last 12 months to stand at £147,000. In Scotland, the average price increased by 4.0% over the year to stand at £143,000. The average price in Northern Ireland currently stands at £124,000.

The East of England is the region which showed the highest annual growth, with prices increasing by 12.3% in the year to October 2016. Growth in the South East was second highest at 9.1%, followed by London at 7.7%. The lowest annual growth was in the North East, where prices increased by 2.7% over the year.

Rate Pressure

According to the latest Moneyfacts UK Mortgage Trends report, there is a slightly mixed picture for average mortgage rates currently, as although the five-year fixed rate continues to fall, the two-year equivalent remains unchanged – and there are signs that next year could signal the start of rate rises once again.

Analysis by Moneyfacts suggest the average two year mortgage rate remained at 2.34% this month, signalling the first month of zero movement since January this year. Despite remaining at a record low, this lack of movement halts the run of rate reductions that had been recorded since June, and hints that a change could be on the way.

Their data shows that 17 banks and building societies have increased rates in the last month, including lenders such as Nationwide, Halifax, TSB, Virgin Money and HSBC – and the latter even withdrew its record-breaking 0.99% two-year deal.

According to Moneyfacts the average five-year fixed rate continued to fall, down by 0.02% to a fresh low of 2.96% but the company is warning that the wholesale cost of funding combined with economic uncertainty could leave many providers finding they have no option but to begin raising rates.


The Financial Conduct Authority (FCA) has launched a market study to consider whether competition in the mortgage sector can be improved to benefit consumers. The FCA wants to understand whether consumers are empowered to choose on an informed basis between products and services and are in a position to understand whether these represent good value for money.

The market study will explore two questions, at each stage of the consumer journey, do the available tools (including advice) help mortgage consumers make effective decisions and do commercial arrangements between lenders, brokers and other players lead to conflicts of interest or misaligned incentives to the detriment of consumers?

The FCA will also review whether there are opportunities for better technological solutions to problems they identify, including greater use of digital channels to deliver information or advice. The FCA will be engaging with a wide range of market participants about their experiences and the regulator aims to publish an interim report in summer 2017, setting out its analysis and preliminary conclusions. This will provide stakeholders with an opportunity to comment prior to publishing a final report in early 2018.

What’s in a word?

Theresa May famously declared that “Brexit means Brexit”, but now the Oxford English Dictionary (OED) has come up with its own definition. Six months after the Prime Minister first delivered the elusive explanation, lexicographers have clarified that “Brexit” is “the (proposed) withdrawal of the United Kingdom from the European Union, and the political process associated with it”.

The definition continues: “Sometimes used specifically with reference to the referendum held in the UK on 23rd June 2016, in which a majority of voters favoured withdrawal from the EU.”

“Brexit” has been added to the OED this month, noting the “impressive” speed with which it became widely used.

Lexicographers said the word filled an empty space in the language, but is now used globally to describe the phenomenon – appearing in many foreign language newspapers.

Grexit – to define “the (potential) withdrawal of Greece from the eurozone monetary union” – was added as well.

The OED has also included the American slang “get your freak on” – meaning to “engage in sexual activity, especially of an unconventional or uninhibited nature” and “to dance, especially in an uninhibited, wild, or exuberant fashion” in its latest update. “Glam-ma”, a glamorous grandmother, and “verklempt” – meaning to be overwhelmed with emotion – will also now feature among the dictionary’s 829,000 words, senses and compounds.

A selection of surfing terms such as “break” – a “place in the sea where waves break” – and “bomb” to mean a “very large, powerful wave” have also been added. The OED constantly reviews potential words to include in the dictionary – assessing if they have been used a number of times independently and for a reasonable amount of time before they can be included.

Customer Records

Innovations in technology lead to new and easier ways to deal with product providers. This is great when it makes things simpler for the customer and the adviser, but can cause difficulty when putting together a compliant customer record.

The compliance file review team tell me that there is an increasing incidence of customers that are completing the application for insurance either online or through a telephone interview with the provider. This is really good to hear as it shows that our Partners are embracing new ways to do business. However, this in turn has inadvertently led to issues with file review outcomes where the application form is not available on the customer record at the time of checking by case checkers.

We are aware that the reason some clients want to go down this route is because they perhaps do not want to divulge personal information to you, which is fair enough. From a data protection point of view we also want to be careful how we store sensitive data. If this is the situation, then the compliance team will instead need to see the acceptance terms on file to check that what has been applied for matches your recommendation. Of course, you won’t get these until the client has completed the application.

Cases cannot be passed through documents check or case checking without an application or acceptance being available.

We would suggest one way to avoid down-grading of files under review is to not input the case on NBCS until the client has completed the application with the insurer and you have been sent a copy to upload for compliance purposes, or when the acceptance is received, whichever is sooner.

We also see that, in a high proportion of cases like this, the application does not to go ahead, which is then increasing your admin time with you having to NPW the cases on NBCS. By adopting the guidance above you will save your own time, whilst helping us.

Hopefully this guidance will help you and will allow us to also improve the service we provide.
On the subject of applications, we have been aware of the issue with Aldermore in that they are unable to provide a copy of the application at the point of submission. This is a known issue within the team and Aldermore applications will not be down-graded. Aldermore have been working on a fix for this for a few months now although, when I last chased (this week), there was no firm timescale yet.

image of Gavin EarnshawI hope you are having a productive start to December. Remember, if you need to discuss anything compliance related then do not hesitate to contact your Regional Compliance Manager or the compliance team at Head Office. We are here to help.

Weekly Round-up, 9th December 2016

Let the train take the strain

Homes close to stations serving London’s new Crossrail route are already seeing a price boost, according to new research by Lloyds Bank. The new service – named the Elizabeth Line – will begin operating in May 2017, although the full service stretching from Reading, in Berkshire, to Shenfield, in Essex, won’t be operational until December 2019.

Despite this, house prices near future Crossrail stations have already seen an average increase of 22% over the past two years in anticipation of the new line, from £344,242 in 2014 to £420,798 in 2016, compared to an average 14% growth for surrounding local authority areas and a 13% rise for Greater London. Of the 33 stations surveyed along the new Crossrail route, 28 have seen average house price growth for homes in the same postcode sector outpace the average house price growth for the surrounding local authority areas (14%) over the past two years.

To the west of London, homes in the Burnham area have seen their average house prices jump by 40%, followed by Slough (34%) and Maidenhead (32%). These increases have comfortably outpaced the 15% house price growth for the South-East region as a whole over the past two years.

The most expensive area on the new route is Paddington, where the average house price is just over £1million. As well as being the most expensive, Paddington house prices have also seen the biggest growth following Royal Assent being granted to the Crossrail project in 2008 – almost doubling (99%) over the past eight years. To the east of London, homes close to Shenfield are the most expensive (£659,675), and to the west, Langley costs the most (£589,157).

Still demanding

According to the latest House Price Index from the Nationwide Building Society, UK house prices increased by 0.1% in November, after taking account of seasonal factors. As a result, the annual rate of house price growth slowed slightly to 4.4%, from 4.6% in October, though this is still in line with the growth rates prevailing since early 2015.

The Lender highlighted signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs. The Nationwide drew attention to the fact that mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly.

Nationwide confirmed that fixed rate deals are most popular amongst first time buyers and that over the past twelve months 95% of new mortgage lending to first time buyers was on fixed rates. Borrowers taking out fixed rate mortgages have benefited from historically low interest rates; in October the average two year fixed rate (for those with a 25% deposit) was 1.51%, over two percentage points below the level prevailing in 2012. Moreover, for borrowers with a 10% deposit, two year fixed rates are currently the lowest on record, at 2.42%.

Looking but not finding

In its latest review of the housing market, the Royal Institution of Chartered Surveyors (RICS) has stated that the number of prospective buyers in the UK housing market has increased for the third consecutive month in November, but the figure remains historically low with 13% more surveyors reporting a rise in new buyer enquiries rather than a fall.

In RICS analysis, demand has increased in most parts of the UK leading to a further rise in agreed sales. 9% more respondents across the country reported a growth in activity over the month, but while this is the highest reading since February, caution remains, according to feedback. Supply shortages remain a constraining feature and the growth in sales activity, albeit only modest, alongside a lack of new instructions, has led to a further decline in homes for sale. Anecdotal comments suggest that many respondents expect the beginning of 2017 to be quiet reflecting the lack of fresh properties coming to market.

Near-term expectations from RICS continue to point to rising prices over the coming three months with 14% more surveyors anticipating an increase (rather than a decline). Furthermore, prices are projected to rise, to a greater or lesser degree, across most parts of the UK.


The Financial Conduct Authority (FCA) is urging over 55s to take their time to check that investment ‘opportunities’ are legitimate before they hand over their money. This comes as new research by the FCA reveals a fifth (22%) of over 55s, with above average incomes, suspect they were targeted by a fraudulent investment scam in the past three years, rising to a third (32%) of those aged 75 and over.

On average, victims of investment fraud lost £32,000 each last year. The new research is part of the FCA’s ScamSmart campaign, helping to protect consumers from investment fraud. Despite the high number of people potentially contacted by these scams, one in eight (14%) of over 55s who have invested in financial products (such as stocks and shares) spend little or no time researching them before handing over money. The most common check carried out before investing in a financial product was to look at a company’s website (41%). Far fewer (27%) sought professional, impartial advice, a check the FCA encourages consumers to do before investing.

Interestingly, more time and effort was being spent checking other high cost purchases, even though the money being spent is less. The average cost of major building work in our survey was £25,000, compared to the average of £36,000 spent on financial investments such as stocks or shares. Despite this, significantly more people (47%) said that they researched building work carefully and extensively, compared to those researching financial investments to the same extent (38%).

Festive Fryer

A chippie says its decision to start serving deep-fried Brussels sprouts has been an unexpected success. Andrea Long, from Terry’s Traditional Fish and Chips in Huddersfield said she was not confident the much-maligned festive vegetables would be hit with her regulars after her experiment with deep-fried pumpkin at Halloween did not go so well.

But Mrs Long told BBC Radio 5Live hardly anyone has turned-down the seasonal treat, which she has been giving away to customers waiting for her more traditional menu items to fry. She said that customers’ initial reaction was that “their noses screwed-up and they said ‘no thanks’.” But she said: “When they tried them, I’ve only had three people dislike them and there’s about 200 who haven’t.”
Mrs Long said she is now giving the sprouts a break for a week or so in favour of other Christmas favourites like pigs-in-blankets and stuffing balls. But she said they will be back on December 22 when she will be expecting punters to stump up 10p per deep-fried vegetable for the local hospice charity.

Product Transfers

gavin earnshaw with hlp graphic

The Association of Mortgage Intermediaries (AMI) does great work lobbying organisations like the FCA on matters that affect mortgage brokers.

This week I attended the AMI Risk Forum on behalf of HL Partnership members and one of the topics of debate was Product Transfers. At a time when consumers are encouraged to shop around, with regulatory intervention forcing providers to give clear warnings about comparing the market for utilities, pension annuities, insurance products and the like, it seems odd that this is not the case in the mortgage market. Given that intermediaries manage around 70% of transactions the FCA perhaps feel that consumers are already served well.

However, there is a strong suggestion that things may not be what they seem.

In its latest quarterly bulletin, AMI states: “Current market estimates put the annual gross lending figure for product transfers between £80billion and £100billion. This is more than a third of the entire residential mortgage market and it is unchecked and unrecorded.”

Mortgage Strategy picked up the story and, from what I gather, there is a strong suggestion that two lenders in particular are more aggressive when it comes to their direct to customer contact strategy – Santander and Nationwide.

Why is coming to light now? Well, the issue is that lenders are not required to report their product transfer activity to the FCA. The Product Sales Data reporting system that all lenders have to use to tell the regulator what they are selling does not capture PTs. So, for some time, it has been unclear what the extent of the issue is. But it is definitely an industry problem. Neil Hoare reported on this at the Autumn Conferences, stating that the volume of 2-year fixed rate mortgages arranged mid 2014 would indicate that a similar volume of transactions would have taken place mid 2016 – but it just hasn’t been the case. The feeling then was maybe there is a growing population of borrowers slipping on to variable rate mortgages, but as this latest report suggests, that may not be the case.

So, during the forum on Tuesday, the panel debated the issue. There was certainly a lot of anger in the room. There is no doubt, if this is true, that it is an anti-competitive practice and goes against the FCA’s mantra to offer customers the chance to shop around.

But it also struck me that a key answer to the problem is simple. It just highlights to me how important, as a broker, it is to remain in contact with your customer. Keep in touch on a regular basis (have you designed your electronic Christmas Card yet?) and especially at the point when they are coming to the end of the current product. Tailor your communications and don’t leave it until the last month or two, you need to be reminding your customer and sign-posting the discussion on switching at least 6 months ahead. It appears that this is the point at which the more aggressive lenders are making contact.

Talk to us about 360’s campaign manager. We have the tools to help you retain your customers, but above all, don’t be complacent and think that your customer will always contact you at the end of their product term. Take advantage of our recently launched, simpler Product Transfer process. Above all, don’t let your customer lose their ‘right’ to shop around for the best deal for their needs.

Stressed out

The Bank of England has completed the latest in it’s rigorous testing of Banks using their new Annual Cyclical Scenario (ACS) framework. This ACS framework assesses risks emanating from the financial cycle. It is broad, coherent and severe, considering risks across institutions, markets and jurisdictions.

This year’s test included synchronised UK and global recessions, with associated shocks to financial asset prices. Annual global GDP growth troughs at -1.9%, as it did during the 2008 global financial crisis. The level of UK GDP falls by 4.3%, and the unemployment rate rises by 4½ percentage points. UK house prices fall by over 30% and commercial real estate prices by over 40%. The scenario also includes stressed projections, generated by Bank staff, for potential misconduct costs.

The combination of these stresses lead to system-wide losses of £44 billion over the first two years of the stress — around five times those incurred by the same banks over the two years at the height of the financial crisis. Despite the fact that this year’s test was more severe than its two predecessors, the aggregate results of the 2016 stress test is higher than seen in the past reflecting both the improvements in banks’ capital positions and their greater balance sheet resilience.

Of all the Banks tested, Royal Bank of Scotland missed the target set by almost £2bn. In an observation from the Bank of England, RBS still faces misconduct costs, impaired assets, and they’re still working through the sale of non-core assets, on which they have made progress.

Growth slows

According to the latest results from the Nationwide House Price survey, UK house prices increased by 0.1% in November, after taking account of seasonal factors. As a result, the annual rate of house price growth slowed slightly to 4.4%, from 4.6% in October, though this is still in line with the growth rates prevailing since early 2015.

Commenting on the results the Building Society highlighted signs that, despite the uncertain economic outlook, demand conditions have strengthened a little in recent months, reflecting the impact of solid labour market conditions and historically low borrowing costs. Mortgage approvals increased in October, and surveyors report that new buyer enquiries have increased modestly.

The relatively low number of homes on the market and modest rates of housing construction are likely to keep the demand/supply balance fairly tight in the quarters ahead, even if economic conditions weaken, as most forecasters expect.

Female financial planning

For nearly three in ten (28%) women in the UK, the inability to support themselves or their families financially is their greatest financial fear. A new report from Aegon ‘Protection matters: does women’s financial planning match their priorities?’, which draws on the opinions of more than 2,000 women, found that nearly half (46%) believe it’s solely their responsibility to make sure that their family has enough income should the unexpected happen.

Twenty nine percent of mothers rank the financial security of their children as second only to their children’s health and happiness (56%) in their priorities, while for those without children, 42% place their partner as their top priority.

Yet over half (51%) of women in the UK have no form of protection at all. This means there are some 13 million women who lack the vital safety net that could offer financial support for themselves, their partners and children in the event of death or if they’re left unable to work due to serious illness.

Cost is seen as the main barrier to women better protecting themselves and their families, with nearly half (48%) of women thinking that protection is too expensive. A fifth (20%) don’t see it as a priority and a further one in five (19%) think it’s a waste of money. Nearly two in five (38%) women without protection say that were the worst to happen, they’d rely on their own savings if they couldn’t work for six months, but this itself raises a red flag, as the sums don’t add up. Sixteen per cent of women don’t have any savings at all, a further 16% think their savings would only last as long as six months and just 13% believe their nest egg would support them for a year or more.

As well as turning to savings, 35% of women would rely on their partner’s income to manage financially. However,  nearly half (49%) of women rely on two household incomes to meet their day-to-day costs and other essential expenses, so if one of these incomes was reduced or lost completely it would undoubtedly lead to great pressure on the sole income in the household. Over a fifth (22%) would rely on state benefits provided by the government, which is likely to provide just a small portion of their usual income. For 17% of women, major budget decisions would need to be made in order to cope financially.

City Living

City level house price inflation is running at 8.4% as the upward momentum in house price continues according to Hometrack. Bristol remains the fasting growing city (10.6%) but the rate of growth is slowing. Aberdeen continues to register a year on year price falls (-8.1%).

The impetus for house price growth is shifting from the affordability constrained cities in southern England to cities in the midlands and the north of England where affordability remains attractive. An update of city level affordability reveals that the price to earnings ratio ranges from 3.7x in Glasgow to 14.1x in London, compared to a UK average of 6.5x. London has the highest price to earnings ratio on record as a lack of supply and strong demand fuelled by low mortgage rates has resulted in an 86% increase in house prices since 2009, far in excess of earnings growth. Cambridge and Oxford also have double digit price to earnings ratios which are well ahead of the average over the last 12 years.

Affordability across other cities is more in line with the long run average, although strong house price growth in Bristol in the last 2 years has pushed the price to earnings ratio to 9.2x. Three cities have price to earnings ratios that are below the long run average, namely Glasgow, Liverpool and Newcastle where house price growth is starting to increase off a low base.

Time to Argue, Cry and update Social Media

The average person will spend more than three years updating social media, 12 months in the pub and 235 days waiting in a queue over the course of a lifetime, according to a study. A survey found that people will spend an average of eight months laughing, five weeks arguing and 30 hours crying – as well as suggesting that people from England will spend more time in the pub than their Irish, Scottish and Welsh counterparts.

The Samsung report found that 92% of people agreed that it feels as though time seems to speed up as they get older. The survey, commissioned to mark the launch of the new Samsung Gear S3 smartwatch, found that on average people believe that their 30’s are the happiest stage of life and they expect to retire at the age of 63.

The cliche about the British love of queuing appeared to be backed up by the survey, with respondents revealing they will spend about seven months of their lives standing in line, while one year and seven months will be spent commuting.

The average number of days spent socialising at the pub in a lifetime were broken down regionally: England – 368 days, Northern Ireland – 299 days, Scotland – 298 days, Wales – 279 days. People will spend an average of three years and 10 days browsing social media such as Instagram, Twitter and Facebook, the survey found.

The findings also revealed a shift over the course of a generation in terms of how people spend their time, with the research highlighting an “always-on generation” of multi-taskers, with under-40’s spending an average of one hour and 47 minutes a day updating social media in comparison to 40 minutes spent by the over 65s.