You joined Dudley Building Society in 2022. How have your first 18 months been?
They’ve been fantastic. I joined in November of that year, shortly after former Prime Minister Liz Truss’ now infamous mini-Budget, which was a challenging time for the entire industry, to say the least.
Towards the end of 2022, we took a step back from the mortgage market and used that time to refocus and realign our mortgage proposition, and without a doubt we have come back stronger.
Since relaunching our products at the start of 2023, our focus has been on listening to brokers and aligning our products to match their needs as well as maintaining strong service level agreements (SLAs).
The building society as a whole has achieved a number of important milestones over the past 18 months. In 2023, we not only reported a 58% increase in new mortgage lending but also surpassed £600m in assets for the first time in our 165-year history.
This increase in lending has been in conjunction with a more than doubling of our mortgage team, bringing in key appointments such as a new chief risk officer, additional underwriters, an underwriting manager, two new key account managers, and an intermediary support team manager.
It’s been a real team effort to get this far, and this was recognised when we recently won the Legal & General Mortgage Club Award for best smaller lender. This meant a huge amount to us and was really a sign of how far we’ve come and where we intend to go.
As a smaller lender, how can you compete with some of the bigger players?
I think the key is probably not to try and compete. We don’t try to be something we’re not. We are a building society that offers specialist mortgages and I think the key to success is knowing what you’re good at and sticking to it.
We focus on helping borrowers who might not fit the criteria of mainstream lenders, such as those with complex incomes, the self-employed, older borrowers in or entering retirement, and expats. We also cater to specialist areas like holiday lets and self-build projects.
Our manual approach to underwriting means that cases are assessed by real people, not computers, allowing for a common-sense and adaptable approach to lending. We want to find solutions for cases just as much as the brokers do.
This kind of personalised service is something larger lenders may not be able to match. We’ve seen cases come to us where other lenders have said no, perhaps because of the type of property in a self-build or because an customer is receiving complex income from multiple sources, this is becoming more popular nowadays.
These cases can’t be easily processed through a tick-box application but require time and a human approach by someone who can take a view.
As a lender, it can be rewarding to see the outcomes of these cases. For brokers too, especially on self-build projects, where they can feel like they’ve become part of the project.
Building societies tend to have a strong focus on helping borrowers from all walks of life achieve homeownership. We are one of the few lenders that support Home Ownership for People with Long-term Disabilities (HOLD), a Government-backed shared ownership scheme, which can also produce very emotive results.
We often hear from applicants about the significant difference homeownership has made to their disabled son’s or daughter’s life. This serves as a reminder that it’s not always about competing for the greatest market share or being at the top of best buy tables.
What are some of the challenges in the mortgage market right now?
I think the higher rate environment is still being felt in most, if not all, corners of the market. For those coming off 5-year fixes, for example, some are seeing significant increases in monthly repayments. For many, higher interest rates bring about a ‘wait and see’ approach to buying, but those with real intent tend to only wait so long.
There are positives, however. If we look at the economy, we are in a much better position than we were 12 months ago—inflation has come down, and the general consensus is that the Bank of England’s base rate has now peaked. While unemployment may be rising, we are seeing wage growth remain high.
We also still have a competitive mortgage market. Since the start of the year, lenders have shown an appetite to lend, which works to borrowers’ advantage. We have lowered our own rates three times since the start of the year—our most recent cut being to our retention rates. I think this year we will continue to see retention as a key focus for lenders. It makes sense for lenders to try and retain loyal customers by offering them the best rates. This can also be a quicker, easier option for brokers compared to a full remortgage.
Some building societies have scaled back their holiday let lending. Would you consider doing the same?
We have no plans to do this. We are in part led by brokers when it comes to our propositions, and we are still seeing demand for holiday lets. As with everything in life, the key is moderation. While no coastal town wants to see every property converted into a holiday let, I’m sure they also don’t also want to see a complete absence of holiday lets, which can generate a vital source of income for the local area.
Holiday lets play an important role in local economies, especially in tourist-heavy regions. They support local businesses, create jobs, and contribute to the overall economic health of these communities.
Did Brexit dampen demand for expat mortgages?
Not from what we can see. We are seeing strong demand for expat mortgages. It’s also worth remembering that a lot of demand for expat mortgages comes from outside of Europe, in countries such as Dubai and parts of Asia. For example, we accept applicants residing in almost any country and earning in almost any country
It is estimated that 5.5 million British people live permanently abroad – almost one in ten of the UK population – and this can be in all corners of the globe.
I think it’s fair to say that perhaps there was some uncertainty from some lenders following Brexit. Brexit marked a huge change for the country as a whole, not just the mortgage market. This meant there was obviously some uncertainty around how passporting would work, not just for mortgages but for the wider business community.
It’s been over four years since Brexit, so lenders have had time to become accustomed to the new way of working, and that could also be why we are seeing a bit of a buzz around the market for expat mortgages at the moment.
What would you change about the mortgage market?
Not strictly the mortgage market but I think the recent election manifestos produced some interesting results. What we always see are manifestos aimed towards first-time buyers (FTBs) and housebuilding, and this is great as these are areas that are obviously in need. But I would really like to see broader thinking around how to achieve homeownership and housebuilding goals.
Self-build is a great example of this. We are not as advanced in our thinking around self-build as they are in some other European countries. It is estimated that just 10% of UK homes are self-built, compared to other countries where this can be as high as 50%. We tend to have a perception in the UK of self-build being at the high end of the market and out of reach of the general FTB or homeowner.
This isn’t necessarily the case however and there are a lot of options to explore in this area. A government campaign to push self-build could really help. There are lots of mortgage options for self-build borrowers. We offer mortgages up to 80% loan-to-value (LTV) and also lend on eco-self-build properties as well as modern construction methods.
Self-build also makes sense from an energy efficiency viewpoint as it can be much easier to build an energy efficient home from scratch, rather than retrofit.
We were recently able to help a broker whose client sought a £1.3m remortgage, initially on an interest-only basis for a £2.5m self-build project. The property featured a steel portal frame with timber and over 75% steel cladding on the elevations, with the roof also clad in steel profile sheeting. Through our manual underwriting approach and full assessment of the case, we were able to lend on the property when other lenders were not.
What advice would you offer a broker not currently offering specialist mortgages?
When we talk about specialist mortgages, this really covers a whole spectrum of products. For instance, some mortgages which fall under the specialist umbrella, such as those for the self-employed, are generally more in the mainstream domain and areas brokers already transact in. At the opposite end of the scale are areas such as expat and self-build mortgages that require a bit more understanding from brokers.
Even if brokers don’t feel confident handling these cases themselves, it is a good idea to know someone to refer the business onto and not lose the client.
There are, however, some areas such as lending into retirement that should be on a broker’s radar, if not already. Figures quoted recently from the Bank of England showed that over one million borrowers have taken out mortgages in the past three years that will extend into retirement.
There is no doubt that lending into retirement is set to have more of a presence in the future, and if brokers haven’t already, it would be a good idea to become acquainted with the different options available.
What does Dudley have planned for the future?
The next twelve months should be an exciting time for Dudley. We have ambitious growth plans for our mortgage lending and are looking to expand further into the intermediary mortgage market.
While we pride ourselves on our human approach to underwriting, we also recognise that technology is the future. Over the last twelve months, we have laid out a clear vision for the future by making significant investments in technology to enhance the broker journey.
Partnering with a provider of cloud-based banking solutions, we are in the process of revamping our mortgage origination journey.
The adoption of this digital platform will streamline processes, reduce turnaround times from application to offer, and enhance overall productivity. So brokers, watch this space!
