Mark Bogard, CEO of the Family Building Society (FBS), discusses the Society and answers a few of the most pressing questions on the minds of property owners and buyers
Why did you create the Family Building Society?
We felt that current lenders weren’t really offering the right solutions for the way we live today. The way we spend, save and earn money is very different now to how it was even 20-30 years ago and we want to be there for customers and their advisers. I’m glad to say that it is an approach that has been recognised with record levels of new business last year and no less than four nominations in the 2017 What Mortgage awards.
Who did you create the Family Building Society for?
Families; the way we live today means that many families have to work together across the generations. Also our working lives are often much more complicated than they used to be. That could be a single mother with a son in his twenties looking to purchase a home together; or a recently married retired couple, moving back to the UK from abroad and needing a home to share; or indeed, just wanting to stay in a home they have lived in for many years but can’t because their existing lender will not extend their mortgage.
Those are just three examples of real cases where we were able to help families work together and make the most of their circumstances, even if those circumstances aren’t “conventional”.
Why do you think FBS is different from other banks and building societies?
One of the things we are often commended on is our personal, individual approach. We don’t use computers to make the decision on whether to lend; our very experienced team of mortgage advisors and underwriters have the capacity to work closely with borrowers to understand what they need from their mortgage. As a consequence we can make quick common sense decisions. Something of a rarity in this check box driven society!
What does FBS do to help first time buyers get a mortgage?
A key struggle that first-time buyers face is saving for a reasonable deposit, so they aren’t forced into paying the highest mortgage rates. With rising renting and living costs, getting 25% of a property value in order to benefit from the much better rates available can seem next to impossible.
With our Family Mortgage, however, first-time buyers only need to raise a 5% deposit to benefit from a very competitive rate if their parents or grandparents provide 20% security for a period. Many parents want to help and can do so by using the equity they have built up in their own home and/or savings that can act as security.
This also avoids having to ‘gift’ or loan deposits, as well as avoiding the ‘second home’ stamp duty costs if parents wanted to be named on the deeds.
What do you think the effect of stamp duty is on those looking to downsize or buy their first home?
Buying a property is hard enough without imposing more barriers. stamp duty is in desperate need of reform. For first time buyers getting on the property ladder is already tough enough. For those looking to downsize, or move for a new job or because they need an extra room for a new baby, the thought of stamp duty at 3% or more is disheartening and may use up some much needed capital just when you need it most. We believe stamp duty is an unfair tax at a time when social mobility should be of the utmost importance. It suppresses activity in the housing market and the economy generally.
Are those looking to borrow in later life treated fairly and consistently across different banks and building societies?
Frankly, no. Our experience with later life lending is very good. We have really low levels of such borrowers having issues. In later life people are generally sensible and experienced. Of course there are things that need to be thought through, like what happens upon the death of a partner or if you have to go into care. But younger borrowers also face all sorts of difficult life issues too.
How does FBS treat later life lending differently?
For example, we can offer a five-year term to an 89-year-old; longer terms for younger applicants. Of course, a mortgage has to be affordable and consideration should be made by the borrowers should they face a change of circumstances.
We are able to lend well into retirement age because, rather than a set of strict rules applied across the board, each application is underwritten on a case by case basis. If someone is working beyond normal retirement age, we will allow for that. In many ways, people with a healthy pension have a more reliable income than those still working whose situations are subject to change, sometimes at very short notice.
What do you think of the different options available for those in retirement, such as equity release?
Equity release and lifetime mortgages are sometimes a necessary way for people to release funds from their home. But interest rolls up and if you live for 20, 30 or more years can build up to a multiple of the amount originally borrowed, so that little is left for inheritance. You do get a lump sum, and you can forget about paying the interest for the time being, but all the time it is building up in the background.
There may be other options. A normal mortgage may be affordable. If it’s an interest-only mortgage it may allow you to defer downsizing.
Rather than taking the equity release option you could delay the decision for 10 or 15 years and take an interest-only mortgage in the meantime. This can be a viable alternative for older borrowers as long as they can afford it and have a sensible repayment strategy in place.
There are other alternatives, such as our Retirement Lifestyle Booster. It works by releasing your equity on a monthly basis but, by paying the interest owed each month, you can be sure that the amount you owe at the end of 10 years is the same as what you borrowed; to repay you can, for example, downsize.
