Industry Insight Episode 02 | Mortgage Industry Challenges in 2020. Following our earlier feature on Multigenerational Living Trends in 2020, where we explored shifting housing dynamics. This second instalment of our Industry Insight series focuses on the impact of COVID-19 on the UK mortgage industry in 2020.
As the UK market began to adjust to the uncertainty of Brexit, the arrival of the COVID-19 pandemic further disrupted markets. Economic activity slowed dramatically, and the mortgage sector faced unprecedented challenges. Lenders frequently withdrew mortgage products in some cases, within days of launching them, leaving brokers and buyers scrambling to adjust.
The Mortgage Market’s Initial Response to the Pandemic
The early months of 2020 saw lenders react quickly to deteriorating market confidence. As lockdowns began and the housing market stalled, mortgage lenders reduced risk exposure by pulling products from the market.
The combination of widespread furloughs and job redundancies heightened concerns around borrower affordability. This led many lenders to question whether homeowners could meet mortgage repayment obligations under reduced income or unstable employment.
In addition, growing fears of a second national lockdown and localised restrictions heightened anxiety about falling property values. The potential for negative equity, especially for high loan-to-value (LTV) mortgages, became a real concern across the sector.
Changes in LTV Mortgages and Product Availability
The availability of high-LTV mortgage products dropped sharply. According to Moneyfacts, the number of 95% LTV mortgages fell from 162 in early April to just 14 by early June 2020. Similarly, 90% LTV products shrank from 326 to 72 within three months, with some disappearing only days after launch.
These product withdrawals were largely driven by lenders struggling to balance risk management against strong customer demand, especially among first-time buyers with limited deposits.
Income instability further complicated matters. Many borrowers no longer met product criteria due to sudden salary reductions or changes to their income streams. As a result, mortgage applications in 2020 were commonly delayed, paused, or declined outright.
Harpenden Building Society’s Tailored Approach
Throughout the pandemic, Harpenden Building Society maintained a commitment to consistency and client-focused lending. As demand for specialist support increased, the society experienced a sharp rise in applications that other lenders had rejected, often due to mismatches in criteria or complex income.
Supporting Unique Borrowers
Harpenden’s manual underwriting process has proven especially valuable during times of uncertainty. By avoiding algorithm-based decisions, their underwriters could assess complex cases — such as borrowers with freelance income, inconsistent earnings, or a need for interest-only mortgage products.
Where other lenders required standard repayment affordability, Harpenden looked at the bigger picture, ensuring viable applicants weren’t overlooked by rigid requirements.
COVID-19 Mortgage Holidays
In response to the crisis, Harpenden also introduced a COVID-19 mortgage payment holiday for eligible borrowers. Clients who are current with their repayments can defer payments for up to 3 months, helping them weather short-term financial disruptions.
Maintaining Product Availability
Unlike many lenders, Harpenden preserved its entire mortgage product range throughout the pandemic. This unwavering approach provided brokers and clients with much-needed stability during a volatile period in the UK mortgage market.
Looking Ahead (from a 2020 Lens)
As of late 2020, the mortgage industry continued to navigate an uncertain recovery. While the property market showed signs of a rebound, many of the year’s challenges, including income volatility, lender caution, and changing property values, remained unresolved.
Mortgage networks and brokers alike were encouraged to seek flexible lending partners who could navigate complex cases with care. Harpenden’s continued support of bespoke lending solutions provided a critical safety net for clients affected by the economic ripple effects of the pandemic.
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Credit: Harpenden Building Society on Industry Insight Episode 2
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