First published by Mortgage Solutions
Research into how hard firms were hit by the pandemic reminded me of that famous quote from the 80s classic Ferris Bueller’s Day Off: “Life moves pretty fast. If you don’t stop and look around once in while, you could miss it.”
Few could disagree with that statement in the current climate.
In the Financial Conduct Authority’s (FCA) research, the regulator suggests that 4,000 of the 23,000 financial services firms it regulates are at a greater risk of failure.
The suggestion was that firms in certain sectors, notably those operating in the mortgage market, are more likely to be showing a lack of financial resilience.
However, these results were based on research conducted in May and June last year, and an understanding of the position at the end of October.
Questions about threats to business models and profitability might well have been met with much more pessimistic answers by owners back in the first half of last year, certainly from mortgage market practitioners.
Timing, in that regard, is everything.
We might all agree that market conditions and outlook were much different in the immediate period post-lockdown last May.
Certainly, the outlook might have looked very bleak, but life moved on fast and mortgage firms who might have feared the worst should now find themselves in a much more positive position.
Having a robust business model is of course crucial and I’m aware that some mortgage advice firms will sadly still fail over the months and years ahead.
But with sensible planning, an eye on trends, and a focus on quality servicing, I would hope the future looks a lot brighter for the vast majority.
Gross lending to grow
The last quarter of 2020 was likely to have been particularly strong for many brokers – our monthly completions were among the best we’ve known.
Much has been made about what might happen post-stamp duty holiday from April – some are bracing themselves for a drop in applications – but our view remains application levels could well remain strong, as will completions, not just in the next quarter but further into 2021.
We believe 2021 will be as least as good as last year for gross lending – and probably higher still.
Were Q1 2021 applications dragged forward to Q4 last year? Possibly some have, but certainly not all.
Consumer demand for mortgages is likely to be sustained, such that the potential cliff-edge as a consequence of stamp duty returning will be mitigated by other positive forces, especially at a time when lenders’ appetites are clearly growing.
Overall, I believe we will have a strong mortgage market facing us in 2021, and this undoubtedly heightens the opportunity for advisory firms to build greater levels of operational and financial resilience, and for the sector to deliver further investment and growth.
Ultimately it means less risk for clients and the regulator. We appear to be a long way from last spring and for that we should all be breathing a sigh of relief.
Rob Clifford is Chief Executive of Stonebridge