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Commercial Trust
Commercial Trust
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About Me

I work at Commercial Trust, where I am responsible for the advice and news sections. Find us over at https://www.commercialtrust.co.uk/news/

my expertise in the industry

Four years' financial reporting for a readership of amateur and professional property investors, as well as the creation and maintenance of hundreds of advice and guidance articles for landlords and commercial/bridging finance clients.

Commercial's Recent Activity

Commercial Trust
In response to the statement above citing unprofessional and lazy brokers circumventing and sidestepping their responsibilities to their clients, I wish to outline what a responsible broker should do. Thorough research Firstly, it is vital that a broker establishes their client’s requirements and circumstances when it comes to identifying an appropriate mortgage product. In order to do this, a detailed and thorough ‘fact-find’ should be undertaken by the broker. A fact-find is a question and answer process that establishes the nature of the mortgage the client needs, based on the outcome they wish to achieve. ‘Outcome’ is key. What ‘problem’ is the client looking for a solution to? What a consumer can find is that they have a preconceived idea as to the product they believe fulfils their needs; they ask a broker for the latest rates for said type of product and are given options, based on what they dictated to the broker. Recommending a product based on this information alone is fundamentally wrong. The skill of a credible broker is, like detective work, to establish the facts. They must take the client back to basics to understand the solution that is required. This may mean unravelling any preconceptions, even if the client is seasoned investor, because a broker who works daily with a broad range of lenders should have up to date information that the client will not always be privy to. For instance, the client feels certain that a 2 year fixed rate with lender X is what they want, however, they want to complete in a tight turnaround time. The broker knows that the lender the client is confident in has a very slow processing time and is highly unlikely to meet the deadline. The broker can present the options to the client, giving the client the ultimate choice of time over rate. Situations such as this have the potential to cost, or in the right hands save, a client significant amounts of money. It is worth pointing out that a broker’s advice can only ever be as good as the information given by the client. A responsible broker will always ensure the client is aware that the information given must be accurate, as the mortgage recommendation is based on it, and again, errors can be costly. Detailed market, lender and product knowledge Secondly, a broker should have a detailed knowledge of the market, the lenders who operate in it and the products they offer. Commercial Trust works with a panel of forty lenders, who offer thousands of products catering to a wide variety of client needs. If a broker works with a very small sub-section of available lenders, the products they can recommend will be fewer in number and may not offer the client everything they are looking for. The more restricted the panel, the more likely this will be. Brokers who can access a broad range of lenders and therefore a huge range of products, is in a far better position to meet the clients requirements and offer competitive rate options and ensure all this is achieved whilst taking into consideration a client’s circumstances. There is no point submitting an application for a fantastic rate, if the broker has not done their homework and the lender declines the client because they don’t fit with the lenders criteria. We often speak to clients who had been promised a given rate by another broker, only to have them come back to us when the deal falls through, because the broker hadn’t correctly researched the client’s fit with the lender criteria. This shouldn’t happen with a broker who really knows their subject (and the client has given honest disclosure of all the facts). Skill, care and diligence at all times Thirdly, a broker should always conduct their business with due skill, care and diligence. This permeates across all aspects of the business, from basics, such as backing-up an income declaration with tangible evidence, to the intricacies of remortgaging a complex portfolio from sole to limited company ownership with the right product or products. ‘Backdoor’ residential buy-to-let mortgages As to the comments regarding brokers placing ‘backdoor’ residential mortgages as buy-to let, a good broker should quickly ascertain the motives of the client through the fact-find and therefore establish the need for a regulated mortgage. Under no circumstance should a broker knowingly help a client apply for a buy-to-let mortgage for a property they intend to live in. Similarly, if a client wishes to rent property to a family member, the mortgage will need to be a regulated product. Conclusion In summary, a reputable and upstanding buy-to-let mortgage broker will strive to consistently offer a client professional advice, having gained a thorough picture of the clients circumstances and needs, identifying the most appropriate mortgage for them, and make a recommendation based on the client’s needs and wants. Estate agents who have been caught out by a broker they are working with offering their client bad mortgage advice would benefit from more rigourous due diligence checks, prior to appointing a broker partner. Look for a specialist who has detailed knowledge of a broad range of high street and specialist lenders. Test their knowledge by mystery shopping – if you ask “I want your best rate on a two year fixed rate buy to let mortgage” and you are given a rate, or choice of rates, with few or no questions asked, you know you are in the wrong place.

From: Commercial Trust 26 April 2017 14:33 PM

Commercial Trust
This is a very interesting response Simon, and you make some great points. It's quite clear that neither measure (I don't count the revocation of the wear and tear allowance alongside the stamp duty surcharge or finance cost relief restriction) is intended to adversely affect institutional investors, and the government has made no secret that it wishes to encourage this type of investment. Since the publication of the Montague Report in 2012, the government has been overly concerned with how best to encourage institutional investment. Evidently the Treasury and DCLG are convinced that large-scale build-to-let schemes are the way to solve the housing crisis. But to be attractive to institutional investors, the returns from this type of investment need to be predictably high. So either rental returns need to be high (meaning prohibitive rents), property prices need to keep rising, or both. This is why I don't believe the rhetoric of helping first-time buyers. The government and the Bank of England are doing everything in their power to prevent house prices from falling – in other words, becoming affordable. This includes deterring highly-geared investment from private individuals (by restricting buy to let mortgage interest relief) and, potentially, preventing lenders from issuing high-LTV or low-DSCR loans by enabling the Financial Policy Committee to intervene in the sector. So what is the motive? Are the government hoping for an exodus of private investors, enabling institutions to snap up the leftover properties on the cheap? Risky, as if house prices fall, they will take the economy with them; owner-occupiers will become less wealthy in relative terms, consumer spending will fall and credit loss rates will rise. (Does this sound familiar?) More likely is that the government hopes to maintain the current status quo vis a vis prices whilst affecting a transition from a privately driven to institutionally driven sector. Thus, large landlords are encouraged to incorporate, whilst small landlords are penalised and encouraged to sell, probably at a loss. In an ideal world, the housing market would offer affordable and flexible accommodation across all tenures, provided by a mixture of private, institutional and social investment. But several decades of gross mismanagement of the nation's housing have, sadly, made this extremely difficult to provide.

From: Commercial Trust 05 January 2016 13:04 PM

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