Welcome to Skipton Talks with Mortgage Strategy. Today we're thrilled to have Lucy Lewis, National Council Lead at Skipton Building Society joining us. Lucy brings a wealth of experience at the mortgage industry, and we'll dive into some exciting developments from Skipton that are making a real difference for first-time buyers. Hello and welcome to the mortgage strategy podcast in association with Skipton Building Society. I'm Kimberly Dondo, and in this episode, I'm joined by Lucy Lewis, National Council Lead at Skipton Building Society. Thank you for joining me today, Lucy. Thank you for having me. So in case people might not have listened to our last episode we did together, could you give us a bit of background into yourself and your role at Skipton? Yeah, of course, so I've been with Skipton for getting on for two years now, so a little while since we last spoke, and I'm a national account lead and first-time buyer lead for Skipton, which basically means that I look after the relationship system of our key lending partners, those kind of the big mortgage clubs and networks and kind of deal with them looking at, you know, what we can do to help and how we can kind of work together. So a bit different to the BDM to work very much on the criteria and specific cases, and yeah, just a little bit more strategic. Yeah, so last time we touched a little bit more on like the update to how the track record mortgage was going, but we know that it's made such a big impact, especially for first-time buyers. So could you explain the basics and how it uses rental history to assess affordability? Yeah, of course. So I guess the basic concept came from the fact that nearly 20% of households in the UK are renting from the private sector. And we did some research that showed that 8 in 10 customers felt trapped in the rental cycle. So, you know, paying, paying the amount of rent that they were paying meant that they weren't able to pay for deposit for property. And therefore they couldn't get a mortgage. And certainly at the time, mortgage rates were substantially cheaper than property rental prices as well. So our track record mortgage was an effort to help people who were stuck in the rental cycle and who weren't able to get out of it. In the, you know, they had been able to approve that they could pay for the household bills, they could pay for their rental amount on a monthly basis. So taking that into account, we felt able to help people who haven't been able to stay for deposits. So, you know, anything less than a 5% deposit, basically, for anybody who has been renting for a 12 month consecutive 12 month period over the last 18 months. When we launched it, it was specifically for first-time buyers. So it was a product that was only available to first-time buyers. But then we took feedback from the customers, but also lots of mortgage brokers, which showed that people got into rented properties because of various life changes and may have been in there for quite a long time. So they weren't officially first-time buyers because at some point they had owned a property. They might have bought something like that. And they were then stuck in rented and not able to, you know, buy their own property. So also we opened it up to anybody who had not owned a property for the last three years. And the way the product works is essentially, it looks at the amount that people had been paying in their rent. And it was, we said, well, if they had been able to pay that much in their rent, then we felt that it would, and they proved it to 12 months, we felt that they would be able to pay that much on their mortgage. So as long as it also fit within our affordability calculator, so it topped out at the rental maximum, we felt able to lend to them even if they had no deposit at all. Yeah. And I think you touched a little bit on some of the updates that have been made. I've seen some of these updates that have come through with the track record mortgage. So could you outline more of the key changes and how they help borrowers? Yeah, of course. So we made the change to extend it to not just first-time buyers quite early on in the process, but we've made more updates more recently. So we've been able to extend the term, the maximum term from 35 to 40 years, which I feel is really positive. So if you look at research nowadays, 23% of first-time buyers are taking mortgage terms that are greater than 35 years in the sense of 2023 anyway, and that's gone up substantially. It was 17% in 22. So you can see the change because of affordability and constraint. So are able to extend the track record for 40 years rather than 35. Obviously means that people can spread their payments over a longer period of time and they'll keep those payments a little bit lower. So that was one of the big changes. We're also now allowing people to buy new build flats using a track record mortgage product, well, allowing it to be used for the shared ownership market as well, which is a new one for us. And also we've made some improvements and tweaks to the way that we calculate affordability. So as I said before, we were maxed out at the amount that they had been paying in rental, but now we will look at them being able to pay for their new mortgage payment 120% of what they were paying in rental. So that just gives a little more flexibility with regards to affordability. So obviously they still need to fit on our affordability calculator. You've still got this water collection to do, but assuming it fits that way actually compared bit more than you were paying for rental. So that's a real positive as well. Yeah, definitely. And obviously you talked about the inclusion of new build flats and the shared ownership option, which is quite big news. So how will these additional expand access to the track record mortgage? Well, I think it just all helps, doesn't it, to really give people options? And I think that's the important thing. You know, not everybody can afford to buy a house, not, you know, flat very much used to be where people started. And certainly when I bought my first property kind of 20 or years ago, people bought flats or very small to bed terrace houses. And in fact, they were the people that are doing really well. Whereas I think some of the changes that we had more recently helped buy things like that change what people were buying for their first time. And obviously now that's no longer here. We are beginning to see people look at other options. You know, with affordability constraints as well and the higher mortgage rates, people are looking at other things that they can do to take that first step. And certainly flats are one of those things. And, you know, if you're adding in flats and you build flats, we're also an important part of a lot of flats being built, certainly in, you know, in some areas, country more than others. So I think it's quite important to add that in. And it just gives people more options to really get that first foot on the house. And as you know, it's not going to help everybody. But it's a really important kind of tool to have in the box for mortgage brokers to be able to offer people. So yeah, I think I always saw like buying a flat as like the stepping stone to then going on to build to buying like a house. But yeah, it's a good place to start and then build from there, which is what you want to do when you're getting on the property ladder. Yeah, absolutely. We don't all go into kind of the end. You don't go into your full bed family house. It's happy to be only home at the start. I guess some people do, but that seems really fast for me. Yeah, well, there's a lot of furniture going in the full bed. That is no one talks enough about that. But with these updates, how does Skipton's track record mortgage stack up against other 100% LTV products, especially on affordability and flexibility? So I think when we brought our track record product out, it was probably the first product out there for a long time, but didn't require some kind of guarantee from parents or other people going on to the mortgage. So I think it was massively welcomed after quite a difficult period of time, you know, with the truck budget, et cetera, et cetera. So I think it was a breath of fresh air, really. And we have seen so obviously a quarter come out with their products as well. So we have seen different things coming. We thought perhaps more people would kind of move into that space, which would be great if people did, because there would be more options for other people. Track records a bit different because, you know, we're kind of happy to help self-employed people as well as part of it. So certainly our criteria is different to some of the others. It's not the bigger forward ability stretch, but it's a helpful one, I think. And, you know, it really does make a difference. I think all of those pieces together, you know, none of them are kind of products that will help everybody, but with them all together, we're helping more people. And I think that's a real positive. Yeah, definitely, especially that self-employed piece, because I always feel like those people are forgotten when it comes to mortgage products, pensions, so much income support, you know, so, yeah, it's good. Well, and it's an interesting one as well, isn't it? Because lots of first-time buyers are self-employed or they, you know, they are contracted or they're on zero hours contract or doing something like that. So it's kind of important to be able to consider everybody, I think. Yeah, especially in this digital world where there's so many different jobs you can do, and most likely you're freelancing or something like that. So I think we're moving more and more in that direction. So it makes sense to have an emphasis on those people as well. So Skipton is clearly focused on first-time buyers. Why is this group so important to Skipton's mission? Obviously, it's a big part of your role, but why is that? Well, I guess, I mean, if he thinks we're a mutual, so we're a building society founded 170, the audience goes 171, I think, now. And the core purpose then, well, there were two core purposes. One was to give people a safe place to keep their money. And the other one was to help people into homes. So in some ways, our kind of core purpose hasn't really changed, because helping first-time buyers onto the housing ladder is exactly that. It's helping new people into homes. So that definitely, you know, from a building society point of view, that is the main reason, I would say. But I mean, obviously, it's big as in that, isn't it? First-time buyers are fundamental to the property market. If you don't have first-time buyers buying those kind of flats and those smaller properties, then the people who are looking to move in, you know, take the next step on the ladder move by a bigger house have got no one to sell those properties to as well. So you need the people kind of feeding the bottom of the ladder, for everybody else to move on and up as their circumstances change. So it's incredibly important just to keep the whole cycle going. Yeah, yeah, definitely. And the Skipton Group's Homes Affordability Index highlights first-time buyer challenges. So how can mortgage advisors use it to better guide clients? Yeah, so I guess, I mean, as an organization, we are, and lots of people, we are blessed with an awful lot of data. You know, we've got estate agency side as well. So we do have a lot on the surveying side. So we've got lots of information that we can kind of take in and use in there. And it just kind of made sense that we can give a really up-to-date view of what's actually going on in the market at the time. So we've got some really interesting kind of viewpoints that have come out of the affordability index so far. So one in eight, third-time buyers, only one in eight, third-time buyers can afford to buy in the area that they live in and work in, which is quite a stark fact, I think. Yeah. And 80% of people don't have savings, but they need food deposits for their first property. Also, four in 10 renters spend over 45% of their income on kind of an essential housing cost. So you know, you kind of build up the picture, doesn't it? But actually, there's not a lot then to be able to save and put aside, to be able to get that first, but no matter. So I think what the index does for mortgage brokers is it gives them some insight and it helps them to talk people through not only the cost of actually buying a property, but also the cost of them being able to live in a property because we've got those figures into it as well. So, I mean, often brokers get asked, "Is it the right time to buy? Should I wait?" So it gives them kind of the tools to be able to talk around that as well. I think if somebody's showing as, you know, being able to buy, then absolutely it's a great time to look to do that because things change. Yeah. Yeah. I think having that data is very important because it shows that it is more than just, "Oh, you need to give up avocado toast." Because it's really not that, it's not that, it's just so much. If it were that simple, everybody would be doing it, wouldn't they? Everybody would be doing it and no one would be struggling so much. But like a lot of the points that you just made, I can relate to. I also live in an area that would be very difficult for me to, you know, purchase on my own living in the south, not that far away from London with good connections into London. Always makes it more expensive. And then, you know, just the cost of being me, basics of being me is quite a lot. So yeah, I can definitely relate to that. And it's not about, I don't even have that much avocado. So beyond the track record mortgage, what other resources does Skipton offer to support first-time buyers on their journey? So I guess we've got a variety of other things that we do as well. So we've got our income booster mortgage. Also known as joint boroughs sole proprietor, which allows one person to have up to four people on the mortgage to be able to support with affordability. And for us, it's not just family members who can go on it, but also friends. But even, even work colleagues, we have sometimes looking to kind of help each other to buy a property. So that's a great one. And it's probably becoming more common. We're also seeing some people re-morgaging on to it. So yeah, that's a really versatile product. We've got a range of first-time buyer products with a cashback, which is obviously incredibly useful for people who are buying SS home, because it's expensive. You know, we're talking about furniture for four bedroom houses, but buying furniture for your first house is expensive as well. On top of everything else you're paying for. So it's part of our first-time buyer offering. What we do at Skipton is kind of we're all looking within the business to help first-time buyers onto the property ladder and to see how we can work together to make things easier for people and to help particular groups of people. And one of the other things we've looked at is kind of our criteria for the people who come to the UK on Visa, who are also there for first-time buyers. And we've certainly changed our proposition there as well, to kind of help people buy a higher loan to value. So we used to max it out at 75% loan to value now. Now it's maximum 90% loan to value. So that's another one we've done. We've looked at our self-employed. So we've changed our criteria there. So you can either use kind of salary and net profit or dividend. So you've got the option to use both now, whereas before we would just value in dividends and net profit. You know, net profit kind of didn't play a part in looking at it. So I think that feedback came from a mortgage broker actually there. Well, some lenders use, you know, salary and dividends and some of these net profit. Why can't we, why can't we choose? You know, we're the broker with it down the customer. And we're like, actually, that's a very good point. Why can't you choose? So yeah, so we're looking at lots of different things really, making little tweaks. You know, first-time buyers often have been at credit files as well. What can we do to help us to understand, you know, that they are good people, you know, who will be able to afford the mortgage, even if they've got a little bit less kind of back history that we can see. So, you know, what more can we do to understand how we can help more people? Yeah, yeah. I think it's important to have that feedback and have a direct line to brokers and understand what it is that they need, what they are seeing, because obviously you aren't necessarily having a direct line to their clients. Yeah. So you need to have that feedback. And I think that's an important relationship to cultivate. Well, the thing you're right, because they do such an incredible job. And let's be honest, you know, the number of intermediated mortgages is growing, within more and more people actually go to speak to a mortgage broker. So, yeah, you're right. I mean, they are the people that know the circumstances of the customers and what, you know, a lot of them have been in business for a long time as well. So they're seeing what's changing. So it makes complete sense that we go out and we talk to them. But also that we take, you know, the people from Skittland, so credit risk and products and different people to actually go and talk to them, because we see what they're seeing. So our teams aren't hearing it through our voices. They're actually hearing it through the voices of people that speak to the customers. I think that's really, really important as well. Yeah, definitely. And what are the biggest challenges for first-time buyers today and how is Skittland addressing them with these products? So, I guess, you know, the two main challenges, if you boil it down, one is to deposit. Yes. And one is affordability. Yes. You know, and there are other challenges, obviously, cost of living crisis has been a challenge. You know, there are things, inflation, increasing property prices. Yeah, et cetera, et cetera. There's lots of other things. And also, I think housing demand, there's not enough houses. No, no, exactly. There's not enough houses, you know, for people to buy, and there's not enough houses for people to rent either. Yeah. And it's partly that that has pushed up the prices as well, isn't it? So it just makes it a really competitive market. And it makes it really stressful for people as well. Yeah. Yeah. So, obviously, you know, we've done what we can with track record, really try to look at the deposit challenges that people have had, particularly a bit well for people that are renting, or have been renting and therefore unable to save it to deposit. And then also, we've got the joint, or the income-based joint borrower, so proper for other people as well. We do other things. So, gifted family deposits is fine. We'll actually also accept. So, if a landlord wants to give the deposit, so if they'll do a slightly reduced purchase price, then we can accept that as well. So we do quite a lot of land-hield gifted deposits, where land-hields can kind of give a 5% reduction, and then people can use that. So that's come, we've seen that quite a lot more since track record, because obviously, track record kind of starts a conversation. People are looking to buy from their land-hield, and it's like, oh, actually, no, you can. If they'll give you the 5%, then you can still do it. So, yeah, we can quite a lot of that, yeah. Well, not to be such a skeptic. I just didn't know landlords had such a heart. Well, if you think about it, though, so if you're renting a property and you're going to sell it, then obviously, you need to give it to tenants, and then the tenants will move out, and then you've got the agency fee to pay on top of that as well. So, actually, there is a cost associated to that. Whereas, if landlords have had really good tenants in the property, and they want to buy it, and it's a really easy thing, so then there's no estate agent fee to pay. They don't have that kind of, that time, where there's nobody in the property looking after it either. Actually, that 5%, it sounds massive, but when you boil it down, you can see why they would do it. I understand it, yeah. For sure, it's a smart decision. And I also wondered how might the recent updates affect the mortgage market and competition with regards to the track record mortgage? Well, I mean, competition's definitely no bad thing, isn't it? I mean, it would be great if we saw more people kind of jumping on board. Jumping on board and doing more, because obviously, you can't be a lender that's just out there completely. We would be able to do more if other people kind of move into that space. And you're seeing lenders do different things. We've seen more people moving into kind of the visa space. We've seen people looking at their new build criteria and increasing the maximum amount of values on that. So we're seeing different lenders kind of make different tweaks around the market anyway, to kind of help more people and get more business, which is essentially what it's all down to, isn't it? But yeah, we're definitely seeing some changes. And I would imagine we'll continue to see more. OK. And what advice would you give to mortgage advisors working with first-hand buyers, especially with Skipton's latest offerings? So, I mean, mortgage advisors do an amazing job, don't they? I mean, let's be honest, there's so many kind of small firms as well, people that, you know, they spend their time. They're really invested, they really get to know their customers and they're really trying to help them get exactly the right deal for their needs and circumstances. They do an amazing job. And I mean, a few years ago, we thought that kind of would tech come in, you know, will advice still be there? Will we see robo advice coming in? Actually, you've seen more people go through mortgage advisors, because let's be honest, people situations aren't easy. You don't get kind of the vanilla mortgage that you're the vanilla customer. Oh, that's really easy to go through and say, you know, everybody's situations are getting more and more complicated. And I think, you know, people feel quite overwhelmed by buying their first property. Well, you kind of have a bit of an idea, don't you? So you kind of know that you've got to get a deposit and you know that, you know, roughly because you speak to people what they could afford and what they've been told, but that doesn't give you half the information you actually need to be able to take that first step. So I think, you know, brokers do an amazing job of really explaining the process to people, explaining all the costs up front, what they need to do. You know, they can look at their credit file as well and explain what they can do. They need to improve their credit school, how they can do it. So it's not just a transactional approach from, oh, you're buying a house. This is what you're going to do. You know, mortgage brokers actually help people along the way. So they speak people who are thinking about buying a property and get them ready to buy a property as well. And in a position where they're able to do so. So they do an incredibly valuable job, I would say. But yeah, yeah, they're crucial to kind of helping first-time buyers. And you know, they're highly skilled and really valued, I think. I think it's important that they keep up to date, which, you know, absolutely they do. And it's kind of important that they listen to things like this and different, you know, keep up to date with trade press as well and see what's happening. Because we do have technology in place. So sourcing systems, et cetera, et cetera. But to help people as a tool. But actually, so much of what a broker does come down to what they know and their knowledge. And, you know, just really understanding what they can do. So if I took track record as an example, I've kind of said, don't, you know, don't think because you tried it in May last year, when we launched it, don't think we've not changed it because we've made lots of different changes since then. So if you had a case that didn't work then, that doesn't necessarily mean that it's not going to work for your customers now. So absolutely keep on top of things and keep talking to people as well. Because, you know, between us, as I said before, you know, broker feedback is really valuable. And we take it on board and we do what we can as a lender to kind of make a difference following feedback. Yeah, so Lucy, thank you for sharing your valuable insights today. It was really interesting, especially to know how far track record has come. So, for our listeners who are keen to learn more about Skipton and its innovative solutions for four first-time buyers, where can they find more information? So we have an amazing team of business development managers who are brilliant who go out across the country, go and see lots of different terms. They're really happy to talk about our proposition and all the different things that we can do. So they are a great place to start. A lot of them also put on their own little close webinars and things like that. So, you know, they can talk to groups of people. So I would say if you're not in contact with your business development manager, then they're brilliant. They're a really great team. So absolutely, I would make contact. We also have a great telephone team at Skipton who are always happy to take people calls plus webcat who are really efficient. And actually web chat teams even are on a Saturday morning. So I know you're amazing. Yeah. And watching them work is just incredible. But they're real people. So we have real people on our web chat to be able to answer questions rather than just using technology. So that'd be a great place. And then obviously we've got our website, so skipton-intermediars.co.uk. We've got wealth of information. And if you're looking for more on the Affordability Index, it's skipton-group.com/affordability. Amazing. Yeah, I like the emphasis on real people because I've recently had quite a few interactions with AI chatbots and the amount of times they're like, "I'm sorry, I cannot. Oh, it'll drive you crazy." But yeah, we still need real people. So that's amazing. But thank you so much for speaking with me today, Lucy. This is a really great conversation. Oh, well, thanks for having me. It's been great to catch up. Thank you for listening to this episode of Skipton Talks with Morgan Strategy. We do hope that you enjoyed it. For more valuable insights, please visit Skipton Talks Hub. And for more good news, please visit morgystrategy.co.uk. See you next time.
