Nicola Firth Interview

On the MLC Show for Property Professionals we interviewed Nicola Firth of Knowledge Bank.

Nicola Firth is the CEO and Founder of Knowledge Bank.

Knowledge Bank is a multi-award-winning Mortgage Criteria Search System for Intermediaries

Designed and built by brokers for mortgage brokers to make placing cases easier and quicker. Perform as many searches as you like over multiple criteria categories to find out which lenders will accept your client’s criteria.

They have over 120,000 individual criteria being kept up to date by all leading lenders across residential, buy to let, equity release, self build, commercial, bridging, second charges, and overseas mortgages.

We interviewed Nicola in November 2020.

Scroll down to read the transcript of the interview or you can listen via our podcast or watch the interview via our YouTube channel.

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How are you?

I’m good, thank you. Do you know what, we’ve had a great year and part of me feels a little bit bad about saying that because there are lots of companies that through no fault of their own this year, it’s not been a good year for them. But it’s been a great year for us and technology and the mortgage industry in general. We’ve also grown the business, so we’ve recruited four soon to be five new staff on the back of that. It’s been busy but good.

Nicola, please tell us about your career and experiences before you founded Knowledge Bank

So, my background in the industry was as a mortgage broker. I’ve been a broker for around about 14 years before Knowledge Bank both in the good times and the bad times. I say that because I was a broker pre-2007-2008, and then post 2008 and those two worlds were very different. So yes, I worked as an estate agent for a long time that’s where I started. And then I was self-employed at my own brokerage before Knowledge Bank. So, I get it, I understand where brokers are coming from, I understand the challenges that they face and I’m only one step away now. I did that job for so many years and things change but a lot of things remain constant as well.

Are there any similarities between the credit crunch and now in respect of lenders changing their lending criteria and potentially later in 2021 when the reality for many kicks in post-March 2021?

I think there are some similarities in terms of on the face of it, I think some similarities that brokers will have seen now is the, that the scene thinking about lenders, thinking our lenders don’t want to lend. And I think anybody who’s been, who’s actually been in that situation of 2007/2008, would perhaps think about that in a different way really.

The difference was in 2007/2008 and onwards lenders really, really didn’t want to lend, they just didn’t want to lend. They had no money to lend they were in dire straits because of the credit crunch and everything that was going on. So, the result of that was they were trying their best not to lend, they were making the underwriting very difficult, and difficult to get cases through.

Now brokers are seeing that currently, it’s difficult to get cases through, but the differences are like night and day, so even though the symptoms might seem the same, the cause is very different.

This year lenders have wanted to lend, but they’ve had to be cautious because obviously, this is such a fluid market. At the minute we’re looking at house prices, they’ve had the challenge with valuations, not being able to enter people’s properties, dealing with staff on furlough, the mortgage payment holidays that were thrown at them, plus staffing issues there and the ability to do the job.

And then, of course, they’ve had the issues with, self-employed furlough and how stable is that client, so they’re probably looking at cases a lot more closely, but the reasons are very different.

Recently 90% lending has sort of come back with a bang and that’s great, that’s fantastic and that’s been helped by negotiations so that one lender is not getting swamped by all of the 90% business. So, I think it’s very different.

I think the other thing that’s really different as well is that the credit crunch era was a long, hard, deep recession and we didn’t really see it coming good truly until around 2014 and that’s a long time. Each year you think it’s got to be better this year, it’s got to, and it just didn’t get better. Whereas already we can see next year, those green shoots really, with the vaccine and what have you, things will be different next year. House prices will always change, always go up and down but broadly speaking, I think next year will be a lot more positive.

What is your view on payment holidays and how the 1^st raft and 2^nd raft of payment holiday options will impact borrowers and brokers in 2021 and beyond?

I think the payment holidays is a really contentious issue. I think it was done at great haste and great speed and hindsight is a wonderful thing. The lenders didn’t know it was coming, a lot of lenders were sat watching that announcement at the same time as the general public thinking okay, right. And also, as well with a little bit of hindsight, the way it was for want of a better word, marketed, then perhaps payment holiday, holiday as connotations that, it’s something that’s good, it’s fun. And of course, that the true implications of payment holidays are that you still need to make those payments and that that interest is going to get rolled up or however they’re going to deal with it? So, this absolutely was a knee-jerk reaction to what the public needed as things were sliding and quickly way back in March. So, in terms of future implications, one of the things that got said around the time is that you won’t be penalized. It will not be reported on your credit report and that’s still the case. So, when they said that, that wasn’t being disingenuous, that genuinely was the case and is the case. However, what you’ve got to remember is that lenders don’t just look at credit reports, lenders look at bank statements. We now have open banking, which a lot of the lenders utilize to underwrite. The mortgage payments are for most people, the biggest payment that goes out of their bank account every month, so if it’s missing, they can see you’ve had a payment holiday. Now it’s how are they going to deal with that?

Of course, there was the initial three-month payment holiday, and a lot of people took that. So, lots of people took that because they needed it, they weren’t working, and they needed it. People took it because they thought, well, we might need it, so let’s we better take it just in case, other people thought, brilliant, let’s take it let’s have three months off, why not?

So, a lot of different reasons, so we can’t judge people on that first three months. It then got extended to two months, then four months, and then got extended further. So, I think what I would like to see is for lenders to wave that first three months through. What you’ve got to remember is even though this might seem unfair, lenders are looking at risk profiling and if you haven’t been able to afford genuinely to pay your mortgage for eight months, is that being responsible? By then putting them into more debt because of potentially a bigger loan?

I think it is important that lenders take that into consideration just from a being responsible point of view. Also brokers as well, I mean putting my broker hat on again, if somebody sat in front of me and they’d had eight months mortgage or loan payment holidays, I would be asking the questions, what is going to change your situations to make this new mortgage affordable?

I think the area that is of most interest to me is the buy to let market. The reasons that I find that interesting is because, for any landlord, they’re asked the question, in the event of a tenancy void in payments, can you make the payments?

On that application, that landlord, the applicant, will have said, “Yes, we can.” But then they’ve taken the payment holiday, so what was that all about? Could they afford the payments? Were they just chancing it?

So, undoubtedly buy to let lenders are going to look at this, they absolutely are because they’re going to say, “Hang on a minute, you said regarding, a tenancy void in payments you could afford to pay it, so what happened there?”

I would like to see the mortgage payment holidays treated fairly as we go into next year. I think it would be great if they were able to disregard those first three months because I think there was too much ambiguity around it and it was a knee jerk reaction, but then perhaps look more in-depth at people that take them for a little bit longer.

Do you think we will see changes in criteria with the self-employed and what will the impact of credit cards be? Barclaycard amongst others has slashed credit limits drastically from September 2020 onwards.

I think in terms of other criteria, I think we are going to see some changes. We’re seeing a constant shift change in self-employed criteria, we’ll see how that pans out. There could also be criteria that develop from certain industries and typically leisure, tourism, the arts that kind of thing cause those industries have been severely affected. So, I think if we see any new criteria, it will be perhaps industry-related and I wouldn’t be surprised at that next year.

I think you have to be careful because then inadvertently that, that can and does affect mortgages and you might think a credit card, it’s different if it is different lending. But when a mortgage lender is assessing they’re looking at your overall indebtedness, so if you had a credit card with a 5,000-pound limit and you had a thousand-pound balance on that, you’re only utilizing 20% of that, so that looks as though you’re managing money well, you’re not over-indebted, you’re not relying on the credit card.

If that balance then drops down to a thousand pounds, then all of a sudden you’re at a hundred percent. So, all of a sudden in the background that does change the risk, the profiling, and the score, and so all of these things will have implications without a doubt.

I think given they have the right to be cautious because whenever there’s uncertainty there’s cautiousness, I think that’s right to look at that. I think it’s inevitable that next year there will be some changes and some negative impact on this. We’ve not really felt the true negative impact this year, so I think there is a bit of an inevitability about that.

However, I’m still really positive about next year and the one thing is, the will of the people in the U.K. to buy their own homes, to move, it’s very strong and, we do have a strong housing market and as long as we don’t see prices literally tumble off a cliff then that momentum will keep going, it might slow down, but it will keep going. If you look this year, you think self-employed people have had a really rough year but look at trades, plasterers, joiners, decorators, they’ve had a brilliant year. Because people have been spending money on their homes and they’ve actually been able to save money, they’ve not been going out, they’ve not gone on holiday, so there’s a lot of money in people’s pockets now that might not have been.

Post 31st March we are facing the end of furlough and the end of the stamp duty holiday. Will this impact the mortgage market significantly? Will it be tough to get cases through? 

So, people who were furloughed, they were on at least 80% of their salaries. There’s also a lot of people that have actually done all right this year, or certainly not gone backward.

Furloughed employees have received 80% of their salaries, they’ve not been going out to work, so they’ve not been paying for travel, they’ve not been going on holiday, that kind of thing, so the money is there in the system. I think people’s desire to move has also been sparked by lots of people now working from home, lots of people thinking they’re going to continue to work from home and that is going to continue and so they’re looking at options. We’ve seen trends where people are now looking to move, one out of cities into more rural areas, and two looking for either extensions on the properties, sheds in the garden, or buying properties with more space because being locked down in your own home makes you look at it very differently and how that space works for you and your family.

Having worked through the credit crunch as a broker and the five, six years that came after it, I know it’s not impossible to get mortgages to people, even in tricky situations. There are some great specialist lenders out there that are not doing tick box exercises when it comes to underwriting. They are looking at cases and they’re looking at common sense.

I was chatting with a lender and he did one of our webinars and provided us with a great example.

Mark Whitley from Foundation Homelands said while we were in lockdown and he’d been presented with a case, it was a gym owner and he owns six gyms and that was his business, self-employed.  Now straight away as a broker, you could be thinking, “Oh, wow, right okay.” Gyms are closing, gyms are getting hit, we don’t know when they’re opening this guy’s not going anywhere. But actually, when they looked at it, the vast majority of the gym membership was still being paid, so the fact that the gyms weren’t open, didn’t affect his income. Now I’m not saying his income wouldn’t be affected later on down the line, but people haven’t cancelled their gym subscriptions at that time. So even things like that, you’ve got to really get under the hood and think, how viable is this?

A good test I always used to apply is would I lend my own money on this case? If the answer’s yes, it’s worth fighting for it absolutely is. You know that the criteria, on the systems like Knowledge Bank is all there at your fingertips, so you don’t even need to spend hours and days researching cases, It’s all there. I think that there’s a home for most cases, if people are earning, there are homes for most cases out there, so I wouldn’t be deterred at all, not at all.

What is your advice to new mortgage brokers or trainees?

Run don’t do it! I’m kidding! Do you know what? I absolutely loved being a broker. The best thing you can do is to provide great customer service because people will remember you. You know I set myself a goal to be self-sufficient with regards to leads, and that’s entirely possible with recommendations and referrals. One thing I always say is, and this is true for anything you do in life, if you do a good job, you’ll earn a good living.

People want that advice, they need it, they’ll trust that person giving it. I think one of the most important things you can do is, is broaden your knowledge.

With CeMap, people talk about CeMap world and the real world and there’s a reason for that. CeMap world is slightly different from the real world. You come across your first case, you think, well that wasn’t in a textbook anywhere, so it’s a big learning curve. People use the analogy it’s like passing your driving test and learning to drive and absolutely that is the case without a doubt.

The more knowledge you can acquire the better. If you want to then specialize in a particular area, that’s not a bad thing and you can market yourself in that area. Get the tools that you need for the job, a good CRM system is absolutely vital, choose your product sourcing system again, have demos of them because they’re very different. Same with criteria, not everything is the same, the quality of the systems varies massively. In terms of the number of criteria, the lenders the lending types that are on there, there are a lot of differences, so get the systems.

Once you get those things in place, you put those down and confirm what it costs me to do my job they’re the tools for my job. Some brokers will think, “Oh, I’ll try and manage without CRM, I know I need product sourcing, but I’ll try and manage without CRM, I’ll use an Excel spreadsheet, don’t do it. I’ll try and manage that criteria system, I’ll try and keep my own spreadsheet updated, or I’ll just ring around, don’t.

If you were a tradesman, that’s your toolbox, and if you have a good set of tools, you’ll do a good job. That would be my advice to you, watch as much as you can, there are some great webinars out there, from a learning perspective.

Also, speak to lenders, that’s the other thing as well, BDMs are an absolute wealth of knowledge, so make sure that you’re speaking with BDMs and understanding what their offerings are.

Knowledge Bank – Wow. What an achievement to have a vision, make it become reality, and then go on to win awards like the British Specialist lending Awards, the Best newcomer in the mortgage space, and best use of technology. 

Was there ever a time when you were worried it was not going to happen or a moment where the hurdles to overcome felt like Mount Everest? How did you overcome this looking back?

It’s a funny one, you have the idea, and you think, Oh, why has nobody done this? So as a broker, I try to keep my own spreadsheets and it is impossible to do that and do the job as well. I just thought, right, okay, product sourcing is out there, surely, somebody has done this with criteria. And I Googled the life out of it, and I couldn’t find it, there was just nothing absolutely nothing. Then I asked around and everybody’s told me oh yeah that can’t be done, that’s not possible. I thought, okay, has anybody tried?

So that’s where Knowledge Bank was born from. It was born from frustration thinking, you know what, here we are, it’s 2015 why have we not got this facility?

So that’s what we did and that is exactly where Knowledge Bank was born from. Ironically, it’s the system that I wanted to use as a broker, and now I’m not a broker anymore!

It was born from thinking if we get all this information in one easily searchable place, and if lenders keep their own information up to date, that just made sense to me, so and it turns out it was possible. I think that the driver, the real driver was the absolute belief in what we were doing. The belief that this is the right thing, it was right for lenders because lenders were spending so much time keeping spreadsheet after spreadsheet up to date.

We thought brokers are going to love it and of course, it’s the right thing for the customer, because brokers who are maybe selecting, from a panel in their head of maybe five, six, seven lenders, because they know their criteria well, inevitably they’ll be losing business because of that and can they handle heart saying they’re doing the best job for their clients? Definitely not.

So it was that belief that we were doing the right thing and we thought build it and they will come. It was a case of thinking if I think this is a good idea, and I’d been a broker all these years, surely the brokers will agree and of course, they did.

Lenders want brokers on the system, brokers wanted lenders on the system, so there was a chicken and egg element. I suppose there was sometimes that you just realize the size of the job you’ve taken on.

I did have one particular moment when I was invited to a dinner and all of a sudden I’d gone from being a broker and people were talking to me about the system. I got back to my hotel room and I remember thinking, what have I done cause we’re either going to succeed or I’m going to fail big, it’s going to go one way or the other. But for me and the team, all we could see was a success really, and by success, what I mean is providing the industry with a system that everybody could use to benefit lenders, brokers, and customers – that’s success. We’re not a big VC Backed Tech Company, it was all about doing the right thing for the right reasons and we’re still at that place even now.

What are the key features and benefits of a broker using Knowledge bank? What do you think is the best feature or benefit if you could only pick one?

I could list a hundred but .. actually, can I have two?!? There are two I just can’t pick between them, so the two features that I really, really love on Knowledge Bank.

Number one is the evidence of research and that was something that was really important to us from the start that the FCA asks for. You need to evidence your research and you’ve got something to back up your recommendation. The industry is taking that to mean product sourcing results but when it tells half a story, if you’ve picked a lender, that’s not at the top of the product sourcing results, how are you justifying that? So, we give evidence of research that says on this day, at this time, this is what these lenders said their criteria was. That coupled with your product sourcing, is a belt and braces for your recommendation, so I love that feature that went in from the beginning.

The second feature that I love about the system is the broker notes. So, on every piece of criteria, and there are over 120,000 pieces of criteria from over 250 lenders across all the different lending types,  you can put your own notes as a broker on the system. They’re only visible to you, we don’t see them, the lender doesn’t see them.

When a BDM says, we don’t publish this, but for a good case, we would accept X, Y, Z and you get your little notebook out, and you write that down and you don’t remember it, and you don’t open the notebook up because you’re busy and you don’t see it again and then that fact gets lost.

Whereas on Knowledge Bank, you put that in the notes, it stays with that lender, with those criteria, and the next time you have a case like that, it comes up and you’re like, ooh yes! I love that feature.

That I think is probably my favourite feature on there.

Playing devil’s advocate if I am an experienced broker and I have a high level of experience and knowledge of lenders why should I trial or sign up to Knowledge bank?

And you know what? That is a really good question. I said build it and they will come earlier. One of the things that brokers were saying to us was I’ve been doing this job for years, and so it’s all up here in my head. I know it’s all up here. But the reality is, it isn’t.

It’s not about memorizing every single piece of criteria.

To put that in context, on Knowledge Bank across all the lending types we have over 120,000 pieces of criteria.

Now, first off, if you can remember all of that as a broker, I would argue that you’re wasted as a broker and I would say that that you’d be better off on a poker table in Vegas!! You’re going to earn a lot more money with a memory like that so that’s the first thing.

The second thing is let’s say you memorize all of that criteria, this year alone there have been over 27,000 changes to criteria, so you’ve kept up with those as well?

Absolutely impossible.

So, no matter how experienced you are remembering criteria it’s impossible.

You will know some you absolutely will know some but actually that the skill of the broker is not a memory test. I think brokers, have a lot of pride in what they know and their knowledge, and that’s not taking it away from them. It’s the practical application of that knowledge that matters and that’s the value to the client. So, the clients not impressed that you could remember X number of criteria, what they’re impressed by is what you do with that knowledge and the advice that you give them.

And the analogy I always give is to imagine you get on a plane and the part you’re fastening your seatbelt, and the pilot comes out and says, “Listen, don’t worry I know we normally get on with a checklist and check through everything, but it’s all up here you don’t need to worry.”

Are you worried? A little bit yes!

So, the point is, is you’ve got the tool for the job, everybody has checklists and things move on, but it’s the practical application of that knowledge.

Even the most experienced brokers have been really, really pleased with Knowledge Bank. They’ve said, do you know what it actually means I don’t need to learn this ever-changing stuff as there was just over 27,000 changes this year alone, and where do you start to keep up with that?

What are your plans for 2021 with the business and beyond?

So, I’m going to give you something juicy here.

Early next year (2021), we are launching a new partnership with Iris XPlan. It is brilliant.

I used to use Trigold as a broker and I’ve looked at XPlan and it is brilliant, absolutely fantastic.

We’ve now partnered with Iris XPlan to bring it all together.

This is not just both systems on the same login this is actually products and criteria together and we’re just in the testing phase now, so it’s going to be launched early in 2021.

So as a broker, you will be able to go on and say, right, okay. Clients sat in front of me, she’s self-employed, he’s on the zeros contract, they get child benefit, they’re buying a property with a thatch roof and they had a CCJ that was satisfied over three years ago. They want a two-year fixed rate with no arrangement fees and a free valuation.

Who will do that? And you’ll be able to put all of that in, and it’ll tell you the lenders that will do it and they will appear.

I mean, I’m so excited by that, because that is next level, so that just brings these two systems together.

We’re still completely independent. We’ve gone okay best in breeding criteria systems, best of breed with product sourcing systems, and bring them together and that is such a powerful tool in the hands of brokers it really is.

The time that will save them and having those two things together will just be massive.

Then when it comes to why you made the recommendation, that is belt and braces nobody can challenge that because you’re not going to have that situation where someone says why didn’t you go with the cheapest and you have to say well they wouldn’t do it because of criteria, the one that will do it will come to the top.