According to ONS’ most recent crime report, “Bank and credit account fraud” was the most common type of fraud experienced (2.5 million incidents or 75% of total fraud) in the UK, followed by “consumer and retail fraud” 6– such as fraud related to online shopping or fraudulent computer service calls (0.7 million incidents or 22% of total fraud). More than half (1.9 million incidents or 57%) were cyber-related.

Below Sundeep Tengur, Banking Fraud Solutions Manager, SAS UK & Ireland, comments on the progress that FS organisations are making on tackling fraud.

“It’s encouraging to see that the financial services industry is starting to give fraud the attention it deserves.

“With increasing instances of the misuse of alternative currencies like Bitcoin and difficulty in securing the electronic payments industry, the financial sector is rising to the occasion. But there is still plenty of work to be done as fraudsters continue to adapt their tactics.

“Whether it is against low-level bank account and card fraud or more serious attacks on organisations, financial services can’t afford to leave their doors open to fraud. They must continue to tighten defences and improve their capabilities to detect and resolve instances of fraudulent activity.

“To stay secure and instate confidence, organisations must derive actionable intelligence from the information available. Spotting the tell-tale signs of improper payments and transactions means they can get one step ahead and stop any financial or personal assets being compromised.

“Advanced analytics will be at the core of these efforts, crucial for helping firms mine their ever-increasing datasets for these invaluable insights. At the same time, artificial intelligence and machine learning will prove to be just as beneficial as more and more financial institutions are automating the process of fraud detection, improving the speed and efficiency of their response.

“The fraud factor is never going to go away. Yet those businesses that are proactively interrogating data will have a better chance of preventing fraud’s most devastating effects.”

The UK’s Banking and Financial sector has experienced a strong quarter, despite ongoing uncertainty caused by the Brexit negotiations, according to figures recently released in the Creditsafe Watchdog Report. The report tracks quarterly economic developments across the Banking and Financial and 11 other sectors (Farming & Agriculture, Construction, Hospitality, IT, Manufacturing, Professional Services, Retail, Sports & Entertainment, Transport, Utilities and Wholesale).

Sales are up 4.19% from Q2, and the number of active companies and new companies have both increased by 5.9% and 8.5% respectively over the same period. This is supported by the rate of company failures, which has dropped by 4.0%. Total employment has also increased by over 1% in Q3.

The research shows a continued return to form for the Banking and Financial sector in terms of these core metrics. However, the financial health of the sector has been hit as the volume of bad debt owed to the sector has increased by 118.8% in Q3, with the average amount of debt owed to companies coming in at £246,318. Suppliers bad debt, the volume owed by the sector, has also seen a big increase of 127.1%.

Rachel Mainwaring, Operations Director at Creditsafe, commented: “While today’s Creditsafe Watchdog Report show signs of optimism for the UK’s Banking and Financial sector, despite the ongoing political and economic uncertainty throughout Europe and beyond, the levels of bad debt seen in Q3 are a serious cause for concern.

“One company, Pearl Finance Co Ltd, is responsible for over £80 million of bad debt owed to other sectors and we can see the potential for contagion if debt spreads across businesses in the UK. With a big increase in bad debt owed both to and by the Banking and Financial sector this quarter, we’ll need to keep a close eye on the industry over the coming months to see if it can rebalance.”

(Source: Creditsafe)

Welcome to Finance Monthly's countdown of the Top 10 Greatest Trades that the trading floor has ever seen.  We take a look at each trader, the audacious move they pulled off and where they are now.

Scroll through to see who tops our list.

10. The 1929 Short - Jesse Livermore 

Result: $100 million profit

Livermore can be classed as one of the world’s pioneers in terms of shorting the market.

His first attempt was shorting the market by selling Union Pacific just before the San Francisco Earthquake of 1906. The pay-out was £250,000 but that was only the beginning. He followed that up by shorting the market again in 1907. As the stock market crashed Livermore took home $1 million for his efforts. Always looking for the next target, he concentrated on the wheat industry in 1925, with another successful short that earned him $3million.

Livermore was gaining a significant reputation but his real coup de grace would make his earlier trades pale in comparison. In the early autumn of 1929 the Dow Jones is up five-fold in the last 5 years and the euphoric atmosphere that pervaded the entire floor wasn’t shared by Livermore. As the money flowed in reaching an $8.5 billion high, it got to the point where the outstanding loans had exceeded the current amount of money in circulation. In September, as the stocks began to level out, Livermore gambled on his biggest short, which took place on that fateful day in 1929. Looking for a bigger haul and seeing what was coming, Livermore shorted the entire market. As the US Financial sector went into meltdown, Livermore earned himself $100million which in today’s market would equate to a $1.4 billion-dollar haul.

Incredibly, Livermore was declared bankrupt and was banned from the Chicago Board of Trade in 1934, just five years after his greatest success as an investor. No one knows exactly why and indeed how he lost all his money, but his reputation as one of the best ‘shorters’ still stands to this day.

Next: Shorting Black Monday

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With digital currencies taking the financial world by storm, the banking industry is being revolutionized from the outside. And it’s about time. The global banking system, which relies on currencies whose value is partly determined by the people in power (and partly by the demand) and thus, spin the wheels of the capitalist machine, could possibly be turned inside out.

Cue cryptocurrencies. The premise is simple: They are not controlled by any particular country, which means supply depends on demand and the value depends on the movements within the blockchain. However, the programming gets far more complicated than that, as does their relationship with “regular” money and banking. It’s a love-hate relationship, or at least the banks love to hate them, seeing as the more transactions that are performed using crypto, the less power they have to maintain control of the financial capital in their country, and subsequently worldwide.

China was the first country to ban ICOs (initial coin offerings — the process to start a new currency). This shouldn’t really have come as much of a surprise from the country that has a bit of a history of trying to keep their population in check. When the news hit, it had a less than enthusiastic reaction from miners and investors alike. China says the move was to protect investors, which would make sense at a basic level because the Chinese stock market is less than 30 years old and investor protections need to be comprehensive enough for the ever-complicated ecosystem of alternative finance, which still needs time to develop. On the other hand, reports back in September revealed that China is hoping to eventually develop its own fintech sandbox, so their banning of ICOs could possibly be considered as a pre-emptive strike on the competition. Time will tell.

Other countries will also introduce some kind of regulation, but there’s nothing as extreme as China, yet. The USA doesn’t have an outright ban, but the strict regulations with the infamous IRS mean that you have to be an accredited investor to have the right to participate in ICOs. Malaysian officials have issued cautions and announced that there will be regulation to follow and they are not ruling out the possibility of banning cryptocurrencies completely. Most recently, South Korea has stated that strict controls are needed and there will be heavy penalties for offenders. Experts say that this is just paving the way for more control on cryptocurrencies in general. And it’s not just in Asia that governments are starting to play hardball: The banking capital of Europe, Switzerland, has introduced a code of conduct regarding ICOs and regulations for currency use.

Does this all come down to a country’s desire to regulate their own finances and wealth? Maybe. But it seems that they’re missing the point somewhat. The sheer beauty of digital currency is that they work independently of any government or central bank. And seeing as the cryptocurrency market is booming and is only set to continue, completely prohibiting ICOs in these countries is likely to be as effective as trying to ban gaming in the Bahamas, which now plays host to PokerStars' annual high-stakes championship tournament for poker.

As for bans in more countries, there are a couple of possibilities. Some countries will follow suit and introduce regulations on both ICOs and cryptocurrencies, making them lose what made them so appealing and successful in the first place. And others will allow investors to get in on the ground floor of this unregulated space for them to increase wealth in the hope that it benefits the country of the investor. Given the plans for economic growth in Southeast Asia, investors are sure to be plugging for this second option and subsequently leaving their competitors in the dust.

Of course, there will always be those looking for loopholes. After all, where there is a will, there is a way, and when the value of cryptocurrencies increases 400% in a six-month period, a will is easily found. It’s also possible that something as simple as a name change might suffice — premines are becoming an increasingly popular concept in the US at least — until regulations affect these as well, creating a cycle of innovations within the digital currency world.

Richard Meirion-Williams, Head of Financial Services at BJSS discusses how banks can counteract the threat provided by Google, Apple, Facebook and Amazon (GAFA).

It wasn’t long ago that bank branches used to hold personal, trusted relationships with their local customers. However, since the rise of digital banking and the decline of the branch, relationships between bank provider and customer have weakened. While the financial institutions are under pressure to keep up with digital transformation, at the same time demand for a personalised customer experience is high on the banking agenda.

Google, Apple, Facebook and Amazon, the major technology power players, known as GAFA, are transforming the digital banking landscape as we know it. With a huge pool of customer data at their fingertips, GAFA’s move into financial services is simply a natural extension of their current offering. When you consider the vast amount of data that these tech giants can leverage across social media, mobile, customer purchase information and mapping data, GAFA has the ability to provide a highly personalised financial service experience.

For banks to remain central in the lives of consumers, they must provide consistent and fulfilling customer experiences across the digital and physical environment. It’s not just about having access to customers credit or debit accounts, but also a greater/wider insight into their individual customers.

But time is of the essence. Amazon, Apple, Google, Intuit and PayPal have already formed a coalition called Financial Innovation Now to enhance innovation in the financial industry to satisfy the customer need for convenience. The key for traditional financial providers is to act quickly and respond to emerging digital disruptors like GAFA. Banks need to focus on evolving their business models and developing new revenue streams.

4 steps to challenge the GAFA force

Client on-boarding: Banks need to maintain their competitive differentiation and make products available immediately. Recently banks have focused on improving the front-end process. But what about the back-end? By digitising the full spectrum banks can reap the rewards of full end-to-end capabilities. This will mean customers opening an account can get started up in minutes after completing an online application. Making changes to the digital process will also help improve the processes which co-exist in physical branches.

Personalised services and partnering for suppliers and customers: Customer centricity should be at the heart of every business. Banks need to create personalised services to deliver their products using an agile approach. This can be achieved either through the bank or a third-party.

To meet consumer demand for convenience and choice, banks should also look to offer customers “lifestyle” services that can adapt in real-time to fulfil the everyday needs of the banking user. Not only will this help multiply customer interactions but will also help generate new revenue streams.

Leverage Consumers data: Extrapolate customer insights from the vast amount of structured and unstructured customer data using Artificial Intelligence, NLP and cognitive computing. The customer financial information can be leveraged to create market intelligence and to generate new revenue streams.

Create an ecosystem: Banks should take advantage of open environments and create new ecosystems. This could be offering external or white-labelling banking services through open APIs and new partnership models with innovative fintechs or working alongside GAFA. Banks need to develop new products and services on distributed ledgers for transactional access on a continual basis and receive data and events from third parties like Amazon or Apple who can distribute and integrate their products in a broader business environment.

This approach will help counter the GAFA threat and create greater cross and upselling opportunities, along with building customer acquisition, retention and cost optimisation, transforming the cost-to-income ratio from the current average of 63% to hopefully less than 50%*. It is critical for banks to think innovatively and act quickly, otherwise they will become a victim of the GAFA dominance which has already infiltrated other industries.

*Calculation made based on reviewing the published accounts of a number of banks.

This month marks the tenth anniversary of the run on Northern Rock, leading to a more widespread financial crisis, with a number of banks bailed out by governments in the UK and around the world. A decade later, large established banks face new threats on several fronts.

As challenger banks and disruptive technology companies increasingly eat away at the services traditionally offered by the banks, the situation is exacerbated by the incoming regulatory changes of the Open Banking initiative.  When the second Payment Services Directive (PSD2) comes into force in January 2018, banks will be required to open up their customer data to third parties. Customers will be able to directly compare the offering of their traditional bank with those of competitors.

Pini Yakuel, CEO of Optimove, which studies the science behind customer engagement, comments: “The past ten years have in some senses been defined by the aftermath of the financial crisis, but the next ten years will be defined by technology disruption that changes how banks interact with their customers forever.

“The disruption coming with the Open Banking initiative is huge for customer engagement. Customers will be able to compare the value that each financial services company offers them quickly and easily.

“We know already that eight out of ten millennials are happy to switch banks for better rewards[1]. The move to make the industry more transparent will allow individuals to compare these rewards like-for-like and switch to companies that provide them. Banks now have a real fight on their hands to retain a generation of smartphone-empowered, brand-agnostic consumers.

“Understanding behaviours, preferences and needs more clearly is key to developing the kind of emotionally intelligent communication with customers that makes them feel comfortable with their bank and helps them to make good financial decisions. Those banks who can offer something back at each stage of their relationship with each customer will set themselves apart under the intense scrutiny of Open Banking.

“To keep ahead of their competitors, they will need to tailor services to support customers more effectively, offering real value that appeals to each customer personally. Artificial Intelligence and automation tools which reveal what value looks like to each customer will be the secret weapon to help banks succeed in this environment.”

(Source: Optimove)

In 2008 the global financial crisis hit business worldwide and recovery has been slow ever since. At the centre of this recovery banks have played a vital role, but attitudes have shifted over the years. Here Marina Cheal, CMO at Reevoo, answers the question: have banks earned our trust back?

When is a bank not a bank?

In 2008 the major financial institutions managed to comprehensively dismantle consumer trust. Since then, they’ve tried almost everything to win that trust back – but the main change is what’s happening around the big banks, not within them.

The Big Six survived the 2008 crash (some by the skin of their teeth) but nearly ten years on they’ve still to rebuild consumer trust. Their customers remain – mostly out of necessity or inertia. But changing attitudes, expectations and regulations mean a raft of challenger banks are ready to snap them up.

And those big banks have no one to blame but themselves.

Pre-2008, banking customers were supposed to look out for stability, tradition, heritage above everything, even customer service. Customers would put up with inconvenient branch opening hours and computer-says-no failed mortgage applications because at the time, legacy was a good thing.

Today’s banking customer has done a complete U-turn – influenced not just by the failings of the big financial institutions, but innovation in almost every other industry. Compared to how easy it is to set up a Gmail or Uber account, banking is in the dark ages. Challenger banks’ USP is helpfulness not heritage, speed not solidity - and it’s blowing a wind of change through the industry.

This has led to the birth of a clutch of new smartphone-only banks that are focused on making banking a more user-friendly experience. Understanding that banking isn’t just about holding onto and shelling out the customer’s cash when required, these ‘neo-banks’ put money management back into customers’ lifestyles. What, if anything, is the bedrock of people’s modern lives more than money?

So instead of lining up deposits and debits and administrating standing orders, these banks review the customer’s spending patterns, established commitments to help customers better understand how much cash they really have in hand. Oh, and making the experience enjoyable while they’re at it.

Tom Blomfield, founder and CEO of one of the most popular smartphone banks, Monzo, doesn’t believe that the incumbent banks are under immediate threat. He does, however, insist that they will have to change.

He told the People Tell Richard Stuff podcast: “Big banks don’t need to fail for startups to succeed. We’re still fractions of a percent of the market. But retail banks will look dramatically different in five years. They may not have to fail, but that’s not to say that some won’t,” he warns.

Mark Mullen is chief executive of Atom Bank and the former CEO of First Direct. His view is that the market is changing in response to customer needs and it really is time to move with the times.

“When regulation changes, banks change in response. The question is really what drives regulation. A lot of what we see today has been driven by the crisis but also a broader range of influences like advances in technology. The great majority of innovation in banking didn’t start anywhere near banking and so it’s had to respond.”

There can be no doubt that the Big Six have been slow to respond to the changes in the retail banking sector. Barclays only launched a mobile app in 2012 and the majority of mobile banking apps are simply a pared down version of online banking - in many cases, so pared down that the app still can’t perform simple tasks such as pay someone new without referring to the online portal.

Open banking looks set to be the real spanner in the works for banks. PSD2, the second Payment Services Directive will open up customer banking data (with consent under data protection legislation) to anyone the customer is happy to share it with.

This can include but isn’t limited to: online retailers, utilities, insurers... in fact, anyone who can provide the customer with great user experience and simple financial management under a trusted brand.

Being side-by-side, and in some cases having to cooperate with more nimble companies will be an unfavourable comparison – and may shepherd customers toward banks that can offer a more tech-forward solution.

Mullen explains the challenge ahead, for challenger banks as well as incumbents: “Open banking and PSD2 paved the way for an API economy in financial services. The acid test of whether it succeeds is less to do with technology or regulation. What will motivate customers to engage in a different banking model and fundamentally - what’s in it for them?

“We’ve lived with the universal banking model and the one stop shop. The open banking model has to be as convenient. I wouldn’t underestimate that. You can have a great reputation and tick the boxes you think are important and still struggle because the trade-off of effort versus return isn’t transparent.”

This still won’t necessarily drive the big banks into obsolescence but it will strip away the brand and service elements until our hallowed institutions are nothing but white label providers of banking functions. The account management, the ancillary services and the relationship will be with whoever can deliver consumer trust, 2018-style.

Mullen concludes: “This is a very big banking market and there are lots of opportunities for us to develop over the next five years. When PSD2 enacts in January, the world won’t be different but there will be a competition for customers and products over the year.”

Here Christopher Hillman, Principal Data Scientist at Think Big Analytics, A Teradata Company, delves deep into the processes banks use to identify fraud and the culprits within the system.

Insurance fraud is a growing problem which many insurers have begun to dedicate new departments and whopping budgets to try and tackle. Huge amounts of time and effort is now spent detecting fraud before paying claims to avoid the complexity and expense of recovering a loss – insurance companies certainly don’t want to pay out claims only then to realise they are fake.

Previously, this process involved manually and laboriously going through masses of individual claims while looking out for suspicious activity, creating a large drain on time, revenue and resources. Now, much of that backend research is being completed faster utilising data and analytics, thereby improving the productivity and efficiency of processes while keeping costs down. Despite this, a significant amount of data that might be meaningful never gets analysed and often, advanced analysts still need to be brought in to uncover meaning from results.

Fraud Invaders: a business case

Imagine being able to cut directly to the chase, removing the human effort needed to tackle huge numbers of worksheets to view potentially fraudulent activity. With advanced analytics and visualisation techniques, this is now possible. To demonstrate, let’s look at a business case called Fraud Invaders.

This case aimed to solve an insurer’s crucial business challenge by discovering a new way to focus on a tighter subset of cases to drive fraud investigation efficiency. To begin, claims documents that had been filled out and submitted by the insurer’s customers were collected, some of which were known to be fraudulent. These known cases of fraud were flagged and put through text mining to extract anything that was a clear identifier such as a bank account, email address or phone number. Following this process, analytics were used to uncover correlations between claims.

With this output, a data visualisation (or network graph) was put together. The resulting image, like the one included below, was made up of dots which represent individual claims, with lines which draw data connections between two or more claim documents. An example of a fraud indicator can be monthly insurance payments from the same bank account: chances are the separate claims belong to the same person or are three different people working together to commit fraud.

Not just a pretty picture: how it works

There’s more to see than initially (and appealingly) meets the eye. The dot clusters visible in the image show us who the “fraud invaders” are. The larger and more apparently connected the cluster, the greater the likelihood of fraudulent activity: this ability to gauge the potential for fraud based on the size of dots and amount of connections can be carried out with the need for little more than a quick look.

Using graphs like these as a foundation, claims teams can identify likely suspects and focus their investigations on these groups. Although not all suspects pulled out will turn out to be fraudsters, far less time, revenue and resources will have been required for this process in comparison to traditional, manual methods. In addition, incidents that may have previously slipped through the net may now be uncovered.

Uncapped opportunity: lessons from Fraud Invaders

In addition to helping insurers to identify fraudulent activity, advanced analytics and visualisation can also reveal networks of people and strong influencers who can assist businesses in attracting new customers, or cause them to lose them. This branch of data science, known as “Social Network Analysis” (not to be confused with Social Media) is a powerful technique that requires true multi-genre analytics. A variety of individual techniques are required to produce a model of a customers’ social network including text mining, fuzzy matching, time series processing and graph analytics. By traversing a persons’ network graph, claim teams can see who they are connected with and who they are influenced by when making decisions such as a purchase or switching services.

Overall, regardless of the desired outcome, Fraud Invaders offers a good lesson to businesses in how to achieve what they want: begin with a solution – rather than just a problem – in mind.

The pound hit an eight-year low against the euro a few weeks back, with the official exchange rate at €1 to £1.083. At some airports, such as Southampton, travelers were being offered just €0.872 to £1. This represents a 15% reduction in value against the euro since the UK decided to leave the EU and comes as Brexit negotiations are dominating the headlines.

Adaptive Insights VP of United Kingdom and Ireland, Rob Douglas, argues that market fluctuation like this is exactly why businesses need to change their financial planning to be as agile and adaptable as possible. He comments:

“While for many it will be those going holiday that are top of mind as the pound devalues, a much greater concern is how businesses will deal with this fluctuation. Not only will businesses likely be dealing with much greater sums of money and therefore potential loss, but as margins are reduced and prices potentially increased, there will be a knock-on effect across the UK economy that everyone needs to be prepared for.

“Businesses need to be able to bend and flex to changes in exchange rates, while minimising the impact on customers and staff. For many, however, this is not a reality. Recent research shows that over half (60%) of CFOs say it takes five days or more to generate new scenario analyses, enabling them to model the impact of market movements such as this, and yet the majority would like it to be a day or less. This unmet expectation by CFOs sheds a light on the need for a different kind of financial planning that focuses on agility and active planning in nearly real-time to keep pace with the rapid changes in today’s businesses.

“For the UK, uncertainty and volatility is likely to become the new norm, which means businesses need to be prepared for the unknown. While being agile will allow businesses to be more responsive, ‘what-if’ scenarios are also fundamental for businesses to understand the potential consequences of the changing market. After all, many would not have predicted that the pound and euro would reach parity.”

Figures released by UK Finance find the number of debit and credit card transactions grew by 12% in the UK in the year to the end of June, the highest annual rate since 2008. The value of spending also rose, accelerating to 7.2%.

Lenders are currently facing the pending challenge of upping their game after The Bank of England's Prudential Regulation Authority (PRA) highlighted the need to address lending concerns.

Ian Bradbury, Chief Technology Officer, Financial Services Business at Fujitsu UK and Ireland, told Finance Monthly:

“With the use of contactless payment cards soaring by over 140% in the past year alone, the news that UK credit and debit card spending is growing at its fastest rate in nine years comes as no surprise. We expect contactless payments to become an increasingly important feature in the British payments landscape. Making up around a third of all plastic card transactions – up from around 10% just a couple of years ago – the convenience and ease of contactless payment means that such transactions are continuing to gain traction with the public. Not only this, the high-growth adoption of contactless payments underlines the fact that consumers and retailers choose to adopt solutions that are secure, quick and easy to use, as well as ubiquitous.

Contactless payments are not only easier to use than Chip and Pin, they are in many ways more practical than small change and small notes. The significant parallel growth in debit card transactions also suggests that this is not growth just fuelled by debt and easy credit – much of this increase will be a result of contactless payments being made purely due to ease. What’s more, contactless payments have the added value of fuelling other payment solutions such as Apple and Google pay and other wearable technology – which can’t be done as easily with Chip and Pin.

Finally, the success of contactless payments demonstrates that consumers are quick to adopt new payments solutions that focus heavily on improving the consumer experience. However, because consumer experience can cover many aspects including convenience, security, speed and ubiquity, it’s vital that providers put in place ways to improve the experience over current solutions. If future payment solutions do not address all of these areas – which are fast-becoming a customer expectation – then they are unlikely to be successful.”

Three in five (60%) people surveyed by Masthaven bank believes that they would find it hard to get a mortgage today - half (50%) of UK homeowners surveyed feel this way, indicating some may feel like mortgage prisoners.

According to a new report by challenger bank Masthaven, the mortgage market is not in tune with modern consumers' evolving needs; the world has changed and the mortgage industry needs to play catch up. Today the bank publishes new data which indicates that UK householders sense a ‘computer says no’ mentality from mortgage lenders.

Masthaven’s Game of Loans report found many people surveyed believe they wouldn’t get a mortgage today. The poll, conducted by Opinium, reveals that both would-be and existing homebuyers are unsure if lenders would support them: 60% of the adults surveyed believe that if they were to buy a home today, it would be hard to get a mortgage. The bank is concerned that half (50%) of all adults who are homeowners surveyed feel this way; and it’s worried that they may feel like mortgage prisoners.

The new study - comprising two surveys of over 2,000 UK adults, in January and July 2017 - found that almost two in three (65%) people polled believes that getting a mortgage is about ‘box ticking’ not the reality of someone’s situation. This opinion has risen markedly by ten percentage points (from 55%) since the first poll in January.

It also highlights how people feel the mortgage market must adapt to appreciate their changing lives – a large majority (81%) of people surveyed believe lenders should make an effort to understand homebuyers’ individual circumstances. This view is strong among people aged 55 or over (88%), UK homeowners (84%) and parents (82%).

Age is a contentious issue

Nearly three in four (74%) people surveyed said they feel that meeting repayment criteria should determine mortgage eligibility, not age. Moreover, three in five (60%) of those surveyed believes that everyone who can afford the repayments when they retire should be eligible for a mortgage. This view has risen up from 53% since the January poll.

Commenting on the findings, Jon Hall, Managing Director of Masthaven said: “Just as homes have kerb-appeal to buyers, it seems people have a perceived sense of their own mortgage-appeal to lenders. Our report highlights how many people believe they have low or no appeal to mortgage lenders; they have little faith in the market. Whether these homeowners’ beliefs are founded or not, the industry cannot ignore how customers feel – their perceptions need attention. I believe the industry can adapt, and we’re publishing the report to encourage lenders to look at the new face of home borrowing: ordinary people with normal lives. The UK mortgage industry must create products and processes that are fit-for-purpose for society today – a world that’s rapidly evolved and looks different to even just a few years ago.”

Time for change

Game of Loans examines four audiences segments: self-employed, older borrowers, parents, and younger borrowers. Masthaven suggests that, despite new mortgage regulations providing a more stable framework, lenders have not adapted their approaches to cope with evolving financial lives. The bank is urging lenders to look closer at individual borrowers’ lives, so they can create products and processes that are fit for modern life. For example:

• Self-employed: Given the continuing rise of this workforce, the mortgage industry needs to take a fresh look at how it can support them. Affordability models need to reflect the concept of self-employed income; in many instances self-employed borrowers cannot even get past the initial mortgage selection criteria and progress their case to a trained mortgage underwriter, who would have the skills to be able to read and assess their company accounts.
• Parents: The robust affordability criteria have been set for a very good reason, but in many cases parents believe they can afford to make the mortgage repayments. Responsible lenders should be working with brokers to help find affordable solutions that are fit for modern families.
• Younger borrowers: Continued innovation is needed to help first-time buyers onto the property ladder. From unlocking intergenerational wealth and helping grandparents and parents with equity in their homes support their families, to boosting the building of affordable homes.
• Older borrowers:  The old adage of paying off your mortgage pre-retirement simply isn’t realistic for many people today. As the Government launches Lifetime ISAs to bolster home ownership for the under 40s, it should also consider solutions for an ageing population which keeps mortgages alive for longer.

Jon Hall added: “The audiences examined in our report aren’t niche groups on the fringes of society, they’re growing segments of the population with modern needs that a thriving mortgage market must address. It shouldn’t be 'game over' for many homebuyers before they’ve even put a foot on the property ladder. As a bank we need to make sure our application of the affordability rules are revisited regularly, to check hard-working householders are not being excluded from the mortgage market.  As a specialist lender we put people at the heart of the solution. Manual underwriting drives our decision-making rather than technology, and we work in tandem with brokers to assess customers’ individual needs.  I’m concerned to hear so many borrowers feel unsupported when in reality an experienced lender, with flexible processes and great broker partnerships, may be able to help.”

Other key findings

Alongside how difficult they felt it would be to get a mortgage, Masthaven asked people their views on other topics, including: the mortgage process, the UK housing shortage, intergenerational disparity, and lending into retirement.

Over half (55%) of self-employed respondents believes they would find it hard to get a mortgage today; and 70% of them feel that getting a mortgage is about which financial boxes you ‘tick’, not the reality of your situation.

Respondents’ perception of their ‘mortgage-appeal’ varied across the UK. Respondents in Wales have the strongest doubts - 72% believe they would find it hard to get a mortgage today, compared to 53% in Scotland. 68% of people in the East of England feel it would be hard, compared to 50% in Yorkshire & Humberside.

While many (73%) respondents have never used a mortgage broker or adviser, over a quarter (27%) have. Among the latter group, almost one in five (19%) said it was because their circumstances were “complicated”.

Three in four (75%) respondents believes it is unfair the young are struggling to get onto the housing ladder today. This view rises to 78% among people aged 55 or over. It drops to 72% among men, but rises to 78% among women.

Many people surveyed believe the UK housing gap will grow:  61% predict the shortage of affordable homes will increase in the next five years; this rises to 64% among people aged 55+ and is felt strongest (68%) in Scotland.

Nearly three in five (58%) respondents believes the price difference between homes in the north and south of the UK will increase in the next five years, but views vary - ranging from 79% in Newcastle to 44% in Cardiff.

More than two in three (67%) people polled thinks UK interest rates will increase in the next five years; meanwhile almost a third (32%) believes the average wage of homeowners will decrease in the next five years.

(Source: Masthaven Bank)

Mortgage sales for the UK decreased by £1.8 billion in July, down 10.8% on the previous month, according to Equifax Touchstone analysis of the intermediary marketplace.

Buy-to-let figures were resistant to the general decline, down by just 0.2% (£3.9 million) to £2.6 billion, while residential sales dropped by 12.8% (£1.8 billion) to £12.2 billion. Overall, mortgage sales for the month totalled £14.8 billion, up 10.8% year-on-year.

All regions across the UK suffered a significant fall in sales. Scotland suffered the biggest slump of 19.8%, followed closely by Northern Ireland (-18.5%), and the South East (-15.4%).

John Driscoll, Director at Equifax Touchstone, said: “These figures show how volatile the mortgage market can be. Sales have tumbled in July, with every region suffering substantial declines as buyers are put off by continuing political and economic uncertainty, coupled with the worrying gap between inflation and wage growth. These circumstances may be further compounded by the potential for an interest rate hike as early as September, driven by continued pressure on the pound.

“On a more optimistic note, mortgage sales are up over 10% year-on-year and a dip in sales for July is not uncommon; however, as the summer period comes to a close, the long-term outlook for the market still remains very unclear.”

The data from Equifax Touchstone, which covers the majority of the intermediated lending market, shows that the average value of a residential mortgage in July was £199,286 (2016: £188,115) and £159,721 for buy-to-let (2016: £158,415).

Equifax Touchstone utilises intermediary and customer profiling tools to provide financial services providers with a detailed understanding of their marketplace and client base.

(Source: Equifax)