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Industry Insight Episode 2 | Challenges in Mortgage Industry

Industry Insight Episode 2

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 could digest Brexit, the COVID-19 pandemic pushed other considerations aside. It slowed the economy as a whole, significantly affecting the mortgage industry. Lenders have repeatedly pulled products from the market, sometimes mere days after announcing them.

The industry has struggled to adapt to social distancing and lockdown challenges. Buying a property requires travel and visits for purchasers, agents, valuers, and surveyors. Although the property market has begun to rebound, much uncertainty remains.

Industry Insight Episode 2 | What has been the effect on mortgage lenders?

Initially, banks began withdrawing mortgage products due to uncertainty about lockdown duration and a stalling housing market. The wave of mass redundancies and furloughed employees also sparked lenders’ concerns. Consequently, homeowners may struggle to fulfil their mortgage terms after unexpected income reductions.

Moreover, the rise in local lockdowns and the looming threat of a second national lockdown may cause property prices to fall again. Therefore, there is concern that buyers may quickly fall into negative equity. This situation increases the risk of high-LTV products.

Industry Insight Episode 2 | How has this affected products on the market?

Some lenders have reviewed and changed their pricing options and LTVs. Consequently, customers can no longer use their services. According to Moneyfacts, 95% of LTV mortgages fell significantly. From 162 at the start of April, it dropped to 14 by early June. Likewise, the number of 90% LTV mortgages decreased. It shrunk from 326 in April to 72 by the start of July. After a few days, many LTV products were pulled. Providers struggled to balance demand versus risk, leading to these changes.

Moreover, reductions or losses in income have impacted customers. Many have been unable to continue their mortgage applications. They no longer meet the product requirements set by certain lenders.

At Harpenden, we have noticed a surge in customer inquiries. The unique nature of their applications often leads to automatic rejection from other lenders. Reasons include failed affordability on a repayment basis, as many lenders do not consider interest-only loans. Additionally, complexities regarding income, such as freelance work or gaps in income, play a role.

Industry Insight Episode 2 | Harpenden’s response

During the initial stages of the pandemic, Harpenden offered a COVID-19 mortgage payment holiday. For applicants current with repayments, the holiday has lasted up to three months. We worked diligently to find solutions with clients and brokers during this uncertain period.

Unique Application Processing

Our operational nature means we handle unique applications that do not fit traditional lending requirements. Our product range has stayed stable and consistent throughout the pandemic. This stability has been crucial for our expert mortgage brokers during chaotic times.

Manual Application Assessments

All our underwriters manually assess applications, avoiding reliance on computer algorithms. This manual process allows us to create a more accurate portrait of risk. Consequently, we avoid outright rejections. We collaborate with brokers to find flexible solutions for pandemic-related financial challenges.

Connect For Intermediaries

Commitment to Full Product Range

Throughout the pandemic, it has been business as usual for the Society. We continue to offer our full range of products without exception.

Credit:  Harpenden Building Society on Industry Insight Episode 2

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