Welcome to the newsletter from HomeLoan Partnership, designed to keep you up to date with topical market news, sales ideas for your business and developments in the HomeLoan Partnership proposition.

August 2007 is broadly viewed as the start of the credit crunch with evidence of bad debt coming to light in loan books emanating largely from the United States. On 12th September 2007 Northern Rock formally sought and subsequently received a liquidity support facility from the Bank of England but this led to a run on the bank with savers withdrawing an estimated £2 billion in a matter of days.

The rest is history - many commentators suggest that the market will take quite some time to stabilise and recover as it has been affected by many different factors.

Without wishing to be political we have to comment that the governments' handling of the situation has been less than decisive. The chancellor is currently dithering over whether he should temporarily suspend stamp duty to stimulate the market, in fact the reverse has happened with many buyers stalling purchases until a formal announcement is made.

One good thing about the restriction in lending is that the loan books will be improving in quality, with more stringent underwriting and tighter criteria. If this brings confidence to institutional investors then we may just start to see a return of fresh money to the market.

The market presents opportunity for those proactive advisers that actively look for business. Many medium sized firms have disappeared and it has inspired many advisers to start their own businesses, on the premise that 100% of the current lower business levels is better than the 50% split they are receiving.

HomeLoan Partnership offers a great proposition for such business start ups. New business startup plan

The past few weeks have seen two mortgage networks disappear. Trustguard, based in Cardiff and with 31 Appointed Representatives closed for business with little or no notice to member firms. Cotswold Mortgage Services separately announced that they had entered into an agreement with Mortgage Broker Services to merge the network in return for 'preferred packager' status with the resulting larger group.

Notably, both networks were formed from a packager base and they would have felt the worst effects of the credit crunch more than most.

Both Prestbury Holdings and Network Data have been in the press recently after updated trading statements and, in Prestburys case, posting accounts showing a considerable trading loss. Prestbury's Appointed Representatives are forced to watch a very public disagreement between board members traded backwards and forwards in open letters to shareholders.

Again, both of these organisations have operated in house packaging and have had to downsize their staff levels. I suppose many boards will be reflecting on the decision to buy or lease expensive premises or indulge in a large staff base. Who's next? Keep watching the press.

From our own perspective, HomeLoan Partnership has never operated restrictive in house packaging - a deliberate expression of the principle of adviser choice, particularly fortunate given market conditions. Whilst we are not immune to the downfall in the market, we did predict the ongoing effects of the crunch and have replaced lost production through a positive recruitment campaign.

Nice to know that your 23% increase in regulatory fees is being spent wisely! A larger audit team has resulted in the FSA releasing details of it's latest actions against advisers, perhaps smaller directly authorised firms, after individual visits to assess TCF progress. The press commentary suggested that the failings centred largely on a lack of evidence of affordability and also to support advice given.

To recap, by March 2008 the regulator required all firms to have in place sufficient management information to allow an ongoing assessment of Treating Customers Fairly. There should be clear evidence that the TCF principles (click here for a reminder of the TCF principles) have been embedded into the business with a progression towards the eventual deadline of 31st December 2008 (when presumably any tolerance disappears).

If this is an environment where you will struggle to keep up with the regulators expectations then joining HomeLoan will provide the support that you need whilst still providing the majority of the freedoms you enjoy.

Life, but not as we know it (Jim)

Mortgage advisers tend to sell pure life assurance cover to their clients on the basis that this covers the risk of dying, would leave the property unencumbered and above all is fairly cheap - therefore the sale is easier.

The fact is however that, with advances in medical science, a large percentage of people suffer a serious illness but either survive this or die after a protracted period of illness. Stroke, cancer and heart attack are good examples.

Consider the consequences of the inability to attend work due to such an illness or the treatment that is often debilitating. Less and less people have long term sick benefits at work and the mortgage ends up in arrears. There can be nothing worse than this leading to the life premiums being dropped and the individual left uninsurable and with no cover.

It won't happen to me!

As with any protection product you have to first demonstrate that a problem exists that you can deal with and 'test' the clients opinion and willingness to fund premiums. Most people will have known someone that has suffered from one of these illnesses but you can also use claims information from some of the life assurers to highlight the risk.

For example L & G in 2006 paid 1,626 CI claims with an average age of claiments was 44 years. The top reason for claim was cancer at 48% followed by terminal illness at 17%, proving the need for this rider. Over 60% of male claimants and 80% of female claimants were aged 50 or under, well within the term of a normal mortgage. 10,000 people under 55 suffer a stroke each year with 1,000 of these under age 30.

Another overlooked benefit of critical illness is the cover automatically extended to children under some policies. In 2006, 76% of such claims with L & G were related to cancer.

Use the life assurers sales aids and statistics to support your professional recommendation for critical illness. You will find these in the adviser areas of their websites.

How much cover?

Ideally you would link the level of cover to that of the mortgage or of a realistic need, calculated in discussion with the client. What you should not do is regard this as an 'all or nothing' sale, most policies allow stepped benefits and it is always the case that some cover is better than none.

How do premiums compare? Just as a quick guide, a quote for a Joint Life policy for two 30 year old non smokers produced the following premiums.

As you can see, full critical illness cover would not be out of the reach for those that were motivated to buy this and, if budget was an issue you could still provide £50,000 of CI for less than £1 per day.

As usual, where you properly protect your clients you receive the benefit of higher commissions, in this case up to 4 times as much as for life cover alone. Note of course that these premiums are indicative only, as are the commission values as these will vary according to your agreed rates.

Never one to 'sit on our hands', HomeLoan Partnership have just announced the latest improvements to our proposition as follows:

We have added Halifax Insurance products to our already wide panel of insurers and this also allows us to improve our Halifax procuration fee so that we now better the net rate offered (for example) by L & G and PMS.

We have also added a second 24 month provider to our protection panel at the same time as enhancing the rate for the provider. This allows an adviser to select a quality product with minimum possible risk for future clawback (although we also allow every provider to be selected on a case by case basis for non indemnified commission).

We are also currently looking at enhancements to recommended providers for secured loans, commercial loans and Buy to Lets as well as conducting trials with additional lead generation suppliers.

Be proactive with your landlords and commercial premises owners and contact them to ensure that they know the requirements for EPCs from October 2008.

Perhaps lost in the ongoing debate about the effectiveness of HIPs is the requirement for Energy Performance Certificates (EPCs) to be issued on commercial and tenanted properties from October 2008.

As part of the overall requirement to assess the energy efficiency of housing stock and commercial premises in the UK, it will be a requirement that an EPC is obtained on the first occasion that these properties are constructed, sold or rented after the deadline.

The EPC then has to be made available to the prospective tenant at the point of viewing and before entering into a contract. The penalty for non compliance is currently a £200 fine.

How much do they cost? Not as much as Domestic Energy Assessor would like them to! - but they still present a landlord with another requirement to meet and extra expense to cover, albeit they last for a 10 year period.

Find out more about the rules and requirements for EPCs

HomeLoan Partnership have already provided member firms with a source of these EPCs at a low price and on the basis that a margin can be added if required.

If you have clients that are in that period of procrastination about whether now is the right time to sell then consider the following:

If they are buying a bigger property, they may have to accept a lower selling price for their own but the equivalent reduction of the property they are buying will be greater. Most people move properties every 7 years on average but often far longer and therefore they will potentially ride out any further effect of the housing cycle.

If they are 'down sizing' they should consider the effect of a further drop in house prices added to the loss of invested return that they can achieve by the equity released from the property and the savings made by a reduction in running costs of the smaller property.