Phil Spencer: Welcome to Mortgage Insider from Barclays, the one- stop shop
Phil Spencer: for mortgage brokers and all you need to know about
Phil Spencer: the property industry. I'm Phil Spencer, property expert and TV
Phil Spencer: presenter. And today, we're going to be talking about a
Phil Spencer: hotly debated topic, and one that's very close to my
Phil Spencer: own heart, the home buying process. Believe it or not,
Phil Spencer: the UK has the slowest timeline for moving house amongst
Phil Spencer: 12 of the world's most developed countries, around one in
Phil Spencer: three deals fall through. Anyway, I am joined today by
Phil Spencer: two experts and it'll be interesting to see if they
Phil Spencer: have similar perspectives on the topic. Justin Young, Justin is
Phil Spencer: the CEO of the Royal Institution of Chartered Surveyors or
Phil Spencer: RICS, and Clare Beardmore. Clare is Director of L& G Mortgage Club.
Phil Spencer: Welcome to you both. Great to have you on. To
Phil Spencer: kick off with it, let's just start, where are we at
Phil Spencer: the moment in terms of the house buying process? How
Phil Spencer: long does it take on average to buy a house
Phil Spencer: at the moment? Justin, I guess that's one for you.
Justin Young: Sure. So it's a complex process that's taking too long,
Justin Young: that's for sure. And it currently is taking about on
Justin Young: average, 120 days. And so, when we think that's the
Justin Young: average, there's a lot of stuff that's taking longer than
Justin Young: that and that in itself is a massive increase. Since
Justin Young: 2007, that has gone up by 60%. So something is
Justin Young: really getting in the way of this and it really is the
Justin Young: detail of the process and when things happen sequentially and
Justin Young: the fact that it takes so long.
Phil Spencer: It's a shame, isn't it? Because in today's world, the
Phil Spencer: information is all available so much quicker, but we're not
Phil Spencer: getting it through the process. So I've read recently that
Phil Spencer: one and a half billion pounds a year is spent or
Phil Spencer: lost in aborted transactions. And that affects 500, 000 people, one in
Phil Spencer: three deals falling through. So we have got some real
Phil Spencer: obstacles, haven't we?
Justin Young: We certainly have. And as you say, there is a
Justin Young: lot of information available. It is there. It is actually
Justin Young: getting hold of that information and I'm sure we'll come
Justin Young: on to talk about methods by which we could digitize
Justin Young: the entire process and really make it happen a lot
Justin Young: more smoothly. But also as I was mentioning this piece
Justin Young: about sequencing, if we can get things started earlier in
Justin Young: the process, then actually we can then run things in
Justin Young: parallel, so that it doesn't take so long.
Phil Spencer: Wouldn't that be a nice thing for us all? Clare,
Phil Spencer: brokers, it's disappointing their clients. It's disappointing themselves, if they've
Phil Spencer: got a re- broker, the whole mortgage again. And there
Phil Spencer: are probably stories of people having to do that several
Phil Spencer: times. So it's increasing their workload, it's affecting their bottom
Phil Spencer: line. It's bad news for them as well.
Clare Beardmore: Yeah, absolutely. And if you think often, the broker is the
Clare Beardmore: person that deals directly with that customer, does all that hand-
Clare Beardmore: holding, is their support throughout the process. Not just to
Clare Beardmore: advise on a product or a rate, it's absolutely that
Clare Beardmore: handholding. So I've heard one really extreme example recently where
Clare Beardmore: a lady got a customer that they dealt with for
Clare Beardmore: a number of years, was actually on property number eight.
Clare Beardmore: So many properties had fallen through. Now I know that's
Clare Beardmore: quite extreme, but can you imagine the amount of wasted
Clare Beardmore: resource, the amount of wasted time, money, et cetera, to
Clare Beardmore: get them to still looking for a property on, fingers
Clare Beardmore: crossed, on number nine. So yes, plenty of wasted time
Clare Beardmore: and resource there.
Phil Spencer: So painful. And yet there are other parts of the
Phil Spencer: world and even other parts of the United Kingdom, and
Phil Spencer: I'm thinking Scotland, that have a different system. Whether that's
Phil Spencer: more efficient or quicker, I'm not entirely sure, but it
Phil Spencer: is there, isn't it? Should we just talk a little
Phil Spencer: bit about the Scottish market and how that works Justin?
Justin Young: Yeah, very happy to do that. And it is absolutely
Justin Young: quicker in Scotland. It's down to about 90 days- ish,
Justin Young: so a much shorter process. Also the failure rate is
Justin Young: much smaller as well, it's only about 11%. Whereas you
Justin Young: compare that to the figure that you were saying Phil
Justin Young: at a third, it's very, very stark different. So it
Justin Young: does have a real impact. And the secret to what's
Justin Young: happened in Scotland, is that they create the home report
Justin Young: as it's called, and that is all created before the
Justin Young: property is actually put on the market. So in that,
Justin Young: it'll be the information that you'd want to have about
Justin Young: that particular property. It might be the EPC ratings, it
Justin Young: might be information around the property's condition, even evaluation of
Justin Young: the property. And the important thing about doing the condition
Justin Young: and the valuation piece is that it's done by a
Justin Young: chartered surveyor. So a qualified professional who is able then
Justin Young: to give you very clear indication of what you would
Justin Young: need to do to the property if there were certain
Justin Young: issues with it. Because certainly in England, we see of
Justin Young: those failure rates that you were talking about, Phil, where
Justin Young: the transactions don't go ahead, a third of those are
Justin Young: to do with what is found in the survey. And
Justin Young: so, if that's happening later on in the process, it's
Justin Young: all too late by then, which is where you get
Justin Young: that failure. So Scotland do it very well by having
Justin Young: this home report which is there before the property goes
Justin Young: on the market.
Phil Spencer: And are lenders prepared to accept a home report that's
Phil Spencer: been commissioned by the vendor of the property?
Justin Young: Certainly from my point of view, probably Clare as much
Justin Young: for you as well, certainly buyers are very happy to
Justin Young: see that report because they know it's been done by
Justin Young: an independent person. So that's why you need this chartered
Justin Young: surveyor to do that part of the report.
Clare Beardmore: I was just going to add to that I think
Clare Beardmore: even if a lender chose to do an independent valuation
Clare Beardmore: for their own purposes after, I think to get that
Clare Beardmore: property on the market with a professional survey done, it would absolutely bringing
Clare Beardmore: sales through the channel quicker.
Phil Spencer: Okay. So arguably, it would take longer to get a
Phil Spencer: property onto the market and it would actually cost somebody
Phil Spencer: the cost of getting the home report done. But having
Phil Spencer: got onto the market, then the buyers would be better
Phil Spencer: informed or they take better decisions. That's the theory.
Justin Young: I would just say that. Yeah, that's absolutely true. So
Justin Young: what we often find, and this is something that we
Justin Young: would lose by going into this process, is that a
Justin Young: number of people will put properties onto the market in
Justin Young: a sort of speculative kind of way, just to see,
Justin Young: okay, let's put our toe in the water. See will
Justin Young: this property move at this current point in the market
Justin Young: time of year, et cetera? So we would lose that,
Justin Young: which in a way is a bit of a shame
Justin Young: because that's a good part of the market that keeps
Justin Young: things moving. But equally, what you do want is this
Justin Young: fast process once something is on the market. So I
Justin Young: think on balance, it's better to do all the stuff
Justin Young: upfront because you need to be serious about selling a
Justin Young: property if it's going to go on the market.
Phil Spencer: Yeah, it's about having better decisions, isn't it, at the end
Phil Spencer: of the day? The buyers are more informed and make
Phil Spencer: a decision that they're happy to stick with and not
Phil Spencer: change their mind two months down the line when everyone's
Phil Spencer: spent money and emotion and commitment, and then some other
Phil Spencer: information comes to light.
Clare Beardmore: I would totally agree with that, Phil. I think it's flipping the
Clare Beardmore: process on its head at the moment. And if you
Clare Beardmore: look from a mortgage perspective, you get the person ready,
Clare Beardmore: you get the person mortgage ready. So you would've done
Clare Beardmore: credit checks, you would've done all of that, how would you
Clare Beardmore: get the property ready? So yes, you could lose some
Clare Beardmore: of those buyers and maybe speculative buyers, but what I
Clare Beardmore: think you would see is that huge increase around completions.
Clare Beardmore: You'd see that one in three hopefully decrease, and you
Clare Beardmore: would see that completion rate I think hopefully fill that
Clare Beardmore: loss of reactive buyers.
Justin Young: I think also what you'd see there is this sort of
Justin Young: reduction in duplication of effort as well.
Clare Beardmore: Absolutely.
Justin Young: The amount of surveying, resurveying that's done, inspections and so on, and
Justin Young: searches done time and time again, this is why things
Justin Young: need to get done only once in a much more
Justin Young: consistent process.
Phil Spencer: Clare, you make an interesting point there that I'd not
Phil Spencer: thought of before. Actually if we're asking vendors to get
Phil Spencer: themselves and their properties ready for sale, in actual fact
Phil Spencer: as a broker, you're preparing your buyers-
Clare Beardmore: Absolutely.
Phil Spencer: ... to go out into the market. And so, there is
Phil Spencer: a bit of give and take.
Clare Beardmore: Yes, definitely. I think a big push in the industry
Clare Beardmore: that hasn't been looked at in this home buyers and selling
Clare Beardmore: reform, is that earlier stage in the journey, how do you
Clare Beardmore: get that person as a mortgage broker, really mortgage ready,
Clare Beardmore: rather than go out, find the home they love and
Clare Beardmore: then realize that they can't afford it? How do you get that
Clare Beardmore: person ready? So credit checks done, affordability done. And I
Clare Beardmore: think just as importantly is the property, to get property
Clare Beardmore: ready as well and combine the two and I think
Clare Beardmore: you'd have a much higher success rate of driving away some of those inefficiencies.
Justin Young: And that's where we see some of that taking place in other countries where certainly somewhere
Justin Young: like Australia where it's a highly digitized process. And when
Justin Young: we look at countries like Australia, Estonia, Finland, the thing
Justin Young: they all have going for them and they're really efficient processes
Justin Young: is they are digitized. That's absolutely how things happen. So
Justin Young: it's very quick. But in addition to that, in Australia,
Justin Young: particularly in the auction space, if you do put in
Justin Young: that bid for the house and you win it, the
Justin Young: property, that is yours. It's a binding bid. And I
Justin Young: think that's where we could potentially move to that would
Justin Young: stop the buyer sort of getting cold feet, et cetera.
Justin Young: As Clare is saying, get the buyers absolutely ready so
Justin Young: they know what they can afford and how they can
Justin Young: do it, and then have that lined up with the
Justin Young: property preparedness as well.
Clare Beardmore: I think there's a lot of innovation going on in
Clare Beardmore: the mortgage market to get people mortgage ready. I think
Clare Beardmore: lots of innovation and different silos. And mortgage offers can
Clare Beardmore: be done within 24 hours, so that mortgage offer can
Clare Beardmore: be ready. And then it hits all of these checks
Clare Beardmore: coming out that really slow that process down. Is a
Clare Beardmore: mortgage market perfect? Absolutely not. But I think we have
Clare Beardmore: used innovation and automation to try and speed up some
Clare Beardmore: of those processes. Certainty, I think it's a really important
Clare Beardmore: word in this process.
Phil Spencer: Justin, you mentioned Australia. I've spent lots of time in
Phil Spencer: Australia and I'm interested in that auction system. And it's always
Phil Spencer: intrigued me that somebody could stand outside a house and
Phil Spencer: they do actually have them on a Saturday morning on
Phil Spencer: the street and everybody gathers around. It's a piece of
Phil Spencer: theater, it's fantastic to watch. If somebody's putting their hand
Phil Spencer: up and their hand up and their hand up and their
Phil Spencer: hand up, I don't know where the banks come in
Phil Spencer: to sort of ratify what someone's just put their hand
Phil Spencer: up and bid. It's a conundrum to me because somebody
Phil Spencer: could massively overpay and it's all done.
Justin Young: And I think that's the joy of the auction system,
Justin Young: isn't it? If someone chooses to overpay for a property
Justin Young: but they can afford it, well that's slightly on them, isn't it? And I
Justin Young: think this is where the other piece would come in
Justin Young: and where I see the success of this process in
Justin Young: other countries, is that there's elements of regulation and legislation on
Justin Young: it as well. So this point about the offer being
Justin Young: binding, you are absolutely in that. If you ratchet up
Justin Young: that auction price, you've got to go for it. So
Justin Young: I think that holds people back to what they can afford
Justin Young: because they know they will have to pay out for
Justin Young: that if it goes their way.
Phil Spencer: Okay. Let's talk a bit about the reform. I don't
Phil Spencer: know what stage it's got to. The consultation stage was
Phil Spencer: announced back end of last year, I think it was.
Phil Spencer: But there's been lots of talk about the upfront material
Phil Spencer: information and that sounds exactly along the lines that we're all
Phil Spencer: in agreement with. But can we talk where that stage
Phil Spencer: has got to? Where are we at?
Justin Young: Yeah. So that process is still going on. We're gathering
Justin Young: all the feedback across the industry, both from the financial
Justin Young: perspective, also legal and from the property sphere as well.
Justin Young: So bringing that information together, it's going to be some
Justin Young: months of the analysis of that consultation before anything further
Justin Young: happens. But I think it's been a really interesting consultation
Justin Young: in that it contains certainly all this piece around upfront
Justin Young: information and how that would be gathered. But it also
Justin Young: talks about how we actually get estate agents, property agents
Justin Young: into a space where they can really be delivering their
Justin Young: best as well. And so, whether that's around light touch
Justin Young: regulation, primarily through qualifications. So making sure that your high
Justin Young: street estate agencies actually qualified to do the job they
Justin Young: know they need to do, then that's all very helpful
Justin Young: as well, and that's in the consultation. We see this as
Justin Young: well looking for just to upskill the entire market. And
Justin Young: this is why also this requirement for chartered surveyors in
Justin Young: Scotland is also something that I think should be replicated
Justin Young: in England. Of course, I would say that, wouldn't I,
Justin Young: in my role at RICS? But we absolutely need the
Justin Young: consumer, the buyers and also the sellers to be really
Justin Young: comfortable that the people who are advising them are the
Justin Young: real genuine professionals who know what they're doing.
Phil Spencer: There are a number of existing industry initiatives, aren't there?
Phil Spencer: And there are several groups. I've spoken with people from
Phil Spencer: the Digital Property Steering Group, from the Home Buying and
Phil Spencer: Selling Council. I know a little bit about what (inaudible)
Phil Spencer: are doing and I know that they've got backing
Phil Spencer: of the land registry, which suggests government support. So some
Phil Spencer: really good stuff happening, a lot of people pushing in
Phil Spencer: the same direction. But how can we avoid a siloed
Phil Spencer: approach? And what I guess I'm conscious of is, if all
Phil Spencer: the changes aren't mandatory, then every firm in the process...
Phil Spencer: It has to involve everybody or otherwise it doesn't work.
Phil Spencer: Is that fair? Clare, have you got thoughts on that one?
Clare Beardmore: I have definitely. I absolutely think that's a really important factor
Clare Beardmore: that these points are made mandatory. If they're not and
Clare Beardmore: they're voluntary, do you get the same buy- in from
Clare Beardmore: everybody, and then does it work? Does it have that impact
Clare Beardmore: that it needs or some parts of the process more
Clare Beardmore: engaged, more invested than others? And I think that where
Clare Beardmore: it could start to fall away. So that investment, that
Clare Beardmore: bringing this together. How I see it, there's plenty of
Clare Beardmore: verticals, plenty of really good work potentially going on vertically,
Clare Beardmore: but horizontally. And this is where I see these groups
Clare Beardmore: really adding value, is they're the horizontal and they've got
Clare Beardmore: the power, if you like, with industry to really bring
Clare Beardmore: and connect those verticals. And then I think we'll really
Clare Beardmore: see progress. So communication, I think using technology is super
Clare Beardmore: important. How do we speed up the old processes? How
Clare Beardmore: do we move on from probably where we were 20
Clare Beardmore: years ago and use data? I think that is really key, and AI technology
Clare Beardmore: to really drive this forward. And I absolutely believe it's buy-
Clare Beardmore: in and commitment and mandatory for all parties.
Justin Young: And I think that's really important point that you get
Justin Young: the Digital Property Market Steering Group that you refer to,
Justin Young: Phil. That's bringing together all the right people, whether it's
Justin Young: professional bodies or companies themselves, members of government, officials within
Justin Young: government, and so that we can get this full perspective
Justin Young: across the sectors as well, whether it's property or finance,
Justin Young: or whatever. Because some things that hold up transactions are
Justin Young: things like the interaction with HMRC, for instance, just doing
Justin Young: checks on are these people who they say they are.
Justin Young: And Clare mentions the land registry. Critical to the future
Justin Young: of this is digitizing the land registry. Now what a
Justin Young: project that's going to be and that's not something I'd like to head up, but
Justin Young: good luck to whoever does that. But that is vital
Justin Young: and that is really going to accelerate what we can do.
Phil Spencer: I believe that's underway, the digitization of land registry, but
Phil Spencer: as you say that's a big old project.
Justin Young: Yes.
Phil Spencer: Even if we've got collaboration from the different sectors, what
Phil Spencer: is it that's going to be the hurdles or the
Phil Spencer: stumbling block? Is it the capacity of technology? Is it
Phil Spencer: legislation? Is it culture within the industry? People are used
Phil Spencer: to working in their own way and doing their own
Phil Spencer: things. What are the hurdles would you say?
Clare Beardmore: I think it is-
Phil Spencer: All of the above.
Clare Beardmore: Yes. Yes. But I feel that that is really crucial to the
Clare Beardmore: success of this. The governance of that, the security of
Clare Beardmore: all of that. Otherwise where will we be in 20
Clare Beardmore: years time? We could be back to square one. So
Clare Beardmore: it's progress.
Justin Young: I would absolutely agree with that, Clare. I think that
Justin Young: confidence in the data. It's really the main reason why
Justin Young: the previous HIPS initiative really didn't work because of the
Justin Young: lack of confidence there. I think from our own point
Justin Young: of view, when I look at this from the Institution
Justin Young: Chartered Surveyors point of view, we're really going to need
Justin Young: a transition period to this. Because right now, there aren't
Justin Young: enough qualified chartered surveyors to do all of the surveys
Justin Young: and the transactions that we need to get done given
Justin Young: the scale of the market. And if you think in
Justin Young: 2025, they were just shy of, I think it was a million
Justin Young: exchanges. That just gives you an idea of the size
Justin Young: of the market. So we as a profession will need
Justin Young: some time to ramp up, so that we have got
Justin Young: enough qualified surveyors who can deliver this. And as I
Justin Young: was saying about the agents as well, I think we need
Justin Young: to give them time to make sure that they can, if necessary,
Justin Young: get the right qualifications and demonstrate to their clients that
Justin Young: they're absolutely at the top of their game as well.
Clare Beardmore: I was just going to say, I think it's not
Clare Beardmore: just from the surveying side that that could be... we do
Clare Beardmore: need some time and transitioning the conveyancing side of it
Clare Beardmore: as well. And the legal workers across the country, how
Clare Beardmore: can government drive recruitment there, drive training, drive support to
Clare Beardmore: really drive that forward? That's a huge part of the
Clare Beardmore: problem, the conveyancing side. So that can't just be sorted
Clare Beardmore: overnight. That needs time, it needs investment, it needs energy
Clare Beardmore: to sort that part of the process out too.
Phil Spencer: You mentioned home information packs. I can't remember the year
Phil Spencer: that that came and went, but why did that fail? What
Phil Spencer: happened, and what's going to be different this time?
Justin Young: From my point of view, it was questions over the
Justin Young: real provenance of the data. So bearing in mind, this
Justin Young: was a few years ago when actually the ability to
Justin Young: get hold of data and the existence of data was
Justin Young: not as good as it is today. So that was
Justin Young: always a concern. And what that led to was a
Justin Young: lot of rework being done, so you got this entire
Justin Young: duplication because people were nervous about it. I think also
Justin Young: at the time, was the government wholly behind what they
Justin Young: were doing in terms of the information packs and so
Justin Young: on? I think probably not necessarily. But all I see
Justin Young: now is absolutely a real drive from the current government
Justin Young: to get this home buying and selling process sorted out
Justin Young: because it is costing so much money, as you said
Justin Young: at the beginning, Phil, and it is a real issue
Justin Young: for the public, the consumer. So it is something that
Justin Young: the will is absolutely there because the need is there.
Phil Spencer: That's good to hear. Clare, in terms of brokers, brokers
Phil Spencer: are listening to this, if there was one thing that
Phil Spencer: you felt that they should know or that they should go
Phil Spencer: and find out about to keep themselves ahead of the
Phil Spencer: game. Because there are changes coming and they're going to
Phil Spencer: be thick and fast. Well, they might not be fast,
Phil Spencer: but there's going to be plenty of them. What should
Phil Spencer: they be doing? Where should they go looking for information?
Clare Beardmore: I think there's so much information out there. It can actually be quite confusing the
Clare Beardmore: amount of information that is out there. So we've got
Clare Beardmore: an Association of Mortgage Intermediaries and they have responded to
Clare Beardmore: the consultation paper that came out. They are a source
Clare Beardmore: of really great information around what's going on. Use your
Clare Beardmore: network, your mortgage club. Read the press, there's so much positive news
Clare Beardmore: in the trade press as well. And I think you
Clare Beardmore: can find the information online, access it. One thing I
Clare Beardmore: do think we really need to be careful about is,
Clare Beardmore: there is so much information in the mortgage market about it
Clare Beardmore: at the moment, so we really need to make sure that that comes across really
Clare Beardmore: clear. Podcasts, webinars just like this, I think will really help.
Justin Young: And I would say from an RICS point of view,
Justin Young: we have amounts of information on the RICS website, but also
Justin Young: we're creating a specific home buyers and sellers hub. And
Justin Young: we'll keep updating that particularly as results in the consultation
Justin Young: come out and so on, or if we're seeing things
Justin Young: go in a particular direction. So that will come out
Justin Young: in a matter of weeks.
Phil Spencer: Well, great to hear your combined thoughts and it's actually
Phil Spencer: a real of comfort to know that everyone is genuinely
Phil Spencer: pushing in the same direction. There is proper collaboration across
Phil Spencer: the different sectors. Let's get this sorted, goodness me. That
Phil Spencer: was Justin Young, who's the CEO of the Royal Institution
Phil Spencer: of Chartered Surveyors and Clare Beardmore, Director of L& G
Phil Spencer: Mortgage Club. We're recording this on the 28th of January.
Phil Spencer: The views expressed by myself and external guests are not
Phil Spencer: necessarily the views of Barclays. But thanks for listening to
Phil Spencer: Mortgage Insider. I'm Phil Spencer. Check out the show notes
Phil Spencer: for more information on what we've been talking about, and
Phil Spencer: hope to see you next time. Join us then.