First published by Mortgage Introducer
Certainly, if Don McLean were writing ‘American Pie’ in February 2021 he would have got it right in terms of the weather – the last few, often snow-dominated weeks and the very low temperatures have summed up a period in our lives, which we might now all be wishing spring puts an end to.
For advisers, like the weather, I suspect this has been a changeable period to live and work through.
These are unique times – stamp duty holidays are not the norm, and neither has been the situation where we’ve experienced record levels of transactions when the vast majority of practitioners within the mortgage and housing markets are working from home.
Given we are in this ‘other state’ until at least the end of March although if the government does decide to extend the free-SDLT deadline to the end of June as rumoured this might give us some much-needed breathing space, it is understandable that advisers and firms might feel a degree of uncertainty about how the year might continue.
What we wanted to do is ask firms how January had gone for them, and whether from this we might be able to extrapolate out the year ahead.
Were there some key themes in the early weeks of the year which might point the way forward in terms of securing ongoing business and ensuring income levels were maintained?
We asked a number of firms for views, and as you might expect, given the variety of perspectives, there were some diverse answers.
The overwhelming theme however was a degree of uncertainty, but where January had gone better than anticipated.
That said, it is clearly difficult for broker firms to see a clear path through the year based on one month alone, because as David Murray at Advisory FS pointed out: “We’re unsure as we’re still within the stamp duty holiday period; I can only guess from quarter two onwards and it will depend on the effects of COVID and the vaccines, and if employment is not hit so hard.”
January though, for the most part, had been a good solid month, especially compared with January 2020, which had been excellent for many firms, fuelled by the so-called ‘Boris Bounce’ and the greater degree of certainty around Brexit, although whether we might say the same now is a different matter.
Siobhan McAleer of the Northern Ireland-based, The Mortgage Shop said they’d seen no big differences in terms of a Jan 2021/2020 comparison, with her figures suggesting people were still purchasing, and she also mentioned that January saw a significant number of people who were still wanting to complete before the end of the stamp duty holiday.
A figure, we would now suggest, has dropped considerably given that we are just five/six weeks away.
However, as mentioned, if the government does extend, then hopefully those already within the process will be able to secure that SDLT saving, even if they complete after 31 of March, or 30 of June.
Figures from Steve Funnell at Thameside Associates appear to back up this continued focus on purchasing, at least in the early weeks of January.
His purchase mix was 37% last year, compared to 47% in January 2021.
However, the anticipation is that remortgage and product transfer business will begin to be the majority of all transactions in the months ahead, even if purchasing appears to be holding its ground.
There were some concerns voiced about the situation currently facing the self-employed, or freelance/contractors, and the way they were being treated as complex borrowers by some lenders.
It was felt that PTs would increase for these borrowers if there was a tough assessment made of their 2020 income and their ability to evidence a ‘normal income’ after a year when that might well have fluctuated.
One further theme that may well be more prevalent during 2021 is the re-emergence of protection.
Steve suggested his business is now writing far more protection business compared to the second half of last year, and this is undoubtedly an area where our industry could do an even better job during 2021.
Historical industry statistics tell you that brokers traditionally l improve their protection sales when the mortgage demand slips slightly, but we need this to be a priority whatever mortgage market volumes look like.
Of course, much of the assessment of 2021 is based on the prosperity Q2.
Many firms accept that Q1 is not likely to be reflective of the rest of the year, however, there was a large degree of positivity based on the country being released from lockdown, and another potential release of pent-up demand from the last two months.
Steve at Thameside said they’d seen lots of first-time buyer enquiries, and a number of buy-to-let, but they tended to be waiting for lockdown to finish before they would finally make their move.
That does bode well, if it’s repeated across the country, and as Siobhan outlined, it might also play into the suggestion that people might have continued to develop “itchy feet” and those who didn’t consider moving last year, are now thinking it’s right to make their foray into the market in 2021.
Our belief is that the end of the stamp duty holiday will not be a stumbling block for those who want to do this; their focus is on moving and they’ll be fully aware of the costs involved and budget to accommodate those costs.
Overall, mortgage advice firms understandably want to see progress towards ‘normality’ and believe as that happens, more traditional borrower behaviour will return, and the mortgage market will move back into some of its historical patterns.
When that might happen however, is a moot point – no-one can really know – and therefore in the meantime it will be about taking advantage of the opportunities that exist, and perhaps revisiting those product areas, such as protection; consumers deserve it and advisory firms prosper as a result.
Rob Clifford is Chief Executive of Stonebridge