Capital Markets Corporate

January 10, 2020

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

ATMs could provide mortgage advice in five years
ATM giant Diebold Nixdorf claims that ATMs could offer mortgage advice within the next five years. According to Matt Phillips, the firm’s UK lead, the ATM provider is already in discussions with banks about launching self-serving ATMs with basic banking services, such as loan applications with mortgage advisers available to assist the process through video chats, serving as replacements to the dwindling bank branch networks. (From Mortgage Solutions, 2 January 2020)

Vegan ruling opens fight with the Bank of England over notes
Lawyers have warned the Bank of England of the legal challenges its use of animal fats in banknotes may face following a landmark ruling, in which a judge found that believing in “ethical veganism” should be granted the same legal protection under the Equality Act as religious beliefs. As such, animal rights activists can now apply for a judicial review to inquire into whether the use of tallow in the new £5 and £10 notes by the Bank of England classify as indirect discrimination against their beliefs. (From The Telegraph, 3 January 2020)

Providers should say ‘Happy Birthday’ to pension savers

Former Pensions Minister Lady Ros Altmann has urged the Government to require pensions providers to send birthday cards each year with details and forecasts on their pension pots to all savers across the UK. Lady Altmann argues that the cards should adhere to simple rules with easy-to-understand wording to allow all savers to understand how much they have saved and what additional benefits they could be owed. (From This is Money, 6 January 2020)

Family offices poach talent from PE giants
Private equity giants are increasingly seeing their young talent poached by family offices, according to the largest headhunting firms on Wall Street. Many of the money managers moving to family offices have been convinced by lucrative pay and a less intense work pace. This increasing competition further emphasises the growing ability among family offices to bypass the hefty fees in the private equity industry by directly allocating funds into leveraged buyouts. (From Reuters, 6 January 2020)

Home insurance small print could cover your hole-in-one
Many home insurance holders might be unaware of niche coverage that they are able to access through their policies, such as offering coverage for the increased value of an artwork following the death of its artist. Some policies will even cover the cost of the longstanding tradition of buying drinks for everyone at the clubhouse after scoring a hole-in-one. (From This is Money, 7 January 2020)

 

Could 2020 be the year of the first-time buyer boom?

After a year of Brexit-fuelled inertia there are signs that the UK property market is set for an upturn in 2020, with two years of pent up demand from First-Time Buyers (FTBs) ready to take advantage of low mortgage rates and property bargains. But will it last, and will the financial services sector have time to take advantage of the boom?

While many people struggled to buy and sell homes in 2019, recent Figures found that FTB figures were at their highest number of FTBs since 2007 – last year saw 353,400 people get onto the property ladder across the UK for the first time.

Much of this activity was fuelled by Help to Buy. The Government-backed property finance scheme has been hugely popular among FTBs, to the point where some areas of new build were almost 100% financed by HTB-backed deals in 2019.

A year of stationary property prices may have also helped last year’s FTB boom, with house price growth at a 10-year low thanks to buyers and sellers remaining on their fences while Brexit uncertainty continued through the year.

Indications suggest that the FTB boom is set to continue in 2020. Record number of HTB ISAs were set up at the end of 2019, meaning more potential FTBs are preparing to climb onto the property ladder this year. Mortgage lenders also continue to offer rock-bottom rates and more 90%+ Loan To Value (LTV) rates, meaning FTBs will continue to experience a favourable market for some time to come.

But this FTB boom is unlikely to continue in the long term. The current format of the Help to Buy equity loan scheme begins its final year this April. Also, some property market commentators are predicting a “Boris Bounce” in property transactions and price rises this year, which could increase house prices. The Bank of England will also be putting pressure on lenders to increase rates as it recently noted that it is watching the growth in low rate, high LTV environment “like a hawk”.

Bearing all this in mind, the 12 months ahead may be crucial for lenders and mortgage advisers to capturing FTBs’ attention before the boom busts. In a low rate environment, with HTB in full swing and many people looking to finally sell their property, the time is now to ensure that the mortgage industry doesn’t miss the boom.

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