Industry Insight Episode 2
Our previous “Industry Insight” discussed Multigenerational Living Is On an Extraordinary Rise | 2020. In today’s Industry Insight Episode 2, we examine the “Challenges in the Mortgage Industry.
Before the market has been able to digest the implications of Brexit, the COVID-19 pandemic has pushed all other considerations aside and slowed the economy as a whole. The mortgage industry has been significantly affected by this, with repeated occurrences of lenders pulling products from the market, sometimes mere days after they were first announced.
The industry has been hard-pressed to adapt to the challenges of social distancing and lockdown. Buying a property means travel and visiting, not just for the purchasers but also for the other parties involved, such as agents, valuers and surveyors. While the property market has gradually begun to rebound, a great deal of uncertainty still remains.
Industry Insight Episode 2 | What has been the effect on mortgage lenders?
Initially, banks began pulling their mortgage products due to the uncertainty about the lockdown length and the housing market’s stalling. The wave of mass redundancies and furloughed employees also sparked lenders’ concerns. Indeed, there are still potential risks that homeowners may be unable to fulfil the terms of their mortgage after unexpected reductions in income.
Additionally, the increase in local lockdowns in recent weeks and the looming threat of a second national lockdown may once again lead property prices to slump. There is, therefore, a concern that buyers may quickly fall into negative equity, which makes high-LTV products an increased risk. Industry Insight Episode 2
Industry Insight Episode 2 | How has this affected products on the market?
Some lenders have reviewed and changed their pricing options and LTVs, meaning customers can no longer use their services. According to price comparison site Moneyfacts, the number of 95% LTV mortgages fell from 162 at the start of April to just 14 at the start of June. The number of 90% LTV mortgages shrunk from 326 in April to 72 at the start of July. After a few days, many LTV products were pulled from the market as providers struggled to balance demand versus risk.
Reductions or loss in income has also meant some customers have been unable to continue their mortgage applications with certain lenders as they no longer meet the product requirements.
At Harpenden, we’ve experienced a surge of customers making inquiries as the unique nature of their applications has led to automatic rejection from other lenders. Reasons for this include failed affordability on a repayment basis (many lenders will not consider interest-only loans) and complexities regarding their income (such as freelance workers or gaps in income).
Industry Insight Episode 2 | Harpenden’s response
Throughout the initial stages of the pandemic, Harpenden supported a Covid-19 mortgage payment holiday of up to three months, as long as the applicant was currently up to date with repayments. We have worked diligently to come up with solutions throughout this period of uncertainty with clients and brokers alike.
The nature of how we operate means we are used to dealing with unique applications that may not fit traditional lending requirements. Our product range has remained stable and consistent throughout the pandemic, and we know this has been especially important for our brokers in this time of chaos and upheaval.
All our underwriters assess applications manually in lieu of computer algorithms, which means we are able to garner a far more accurate portrait of risk and avoid issuing outright rejections. We aim to work with brokers to flexibly find solutions to the challenges and complex financial situations created by the pandemic. It has been BAU for the Society as we continue to offer our full range of products without exception.
Credit: Harpenden Building Society on Industry Insight Episode 2