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How Brexit and COVID might reshape the mortgage market in 2021

First published by Financial Reporter

Go back a year and the thought of any story knocking Brexit from the top of the news headlines would have seemed inconceivable.

The all-encompassing implications of the UK leaving the EU and the fact 2020 looked set to be defined as ‘the year of the deal’ would have made it a shoo-in for wall-to-wall coverage. But then we reckoned without COVID-19, the pandemic and the utter devastation this would bring to so many people’s lives.

Moving into 2021, it’s very difficult to see anything other than the pandemic as the number one influencer on our marketplace. Indeed, as we work our way through Lockdown 3, while we are lucky as an industry to be still open for business, there are still significant considerations and impacts from the pandemic.

The human cost is both plain to see and utterly dreadful. One of our AR firm Business Principals, Keith Brian of Rivington Mortgages, passed away after contracting the virus. Our deepest sympathies and condolences go out to Keith’s family, friends and colleagues along with others in our industry who have lost loved ones

We’re aware that a number of our colleagues are currently off work with COVID-19 at the moment, with at least one in hospital. Lives are being impacted and so are businesses – as mentioned, our sector is fortunate in that we can continue working, but the need to be prepared, stay safe and follow the guidelines of lockdown have never been so critical.

Advisory firms will also no doubt be dealing with clients impacted by COVID-19 – not just in terms of them currently having the illness, but everything else that has come with the pandemic in terms of impacts to finances/businesses/jobs/income, etc. There is clearly a need to be sensitive and to be the bearer of positive news; and if it can’t be as positive as you would wish it to be, then, without doubt, the bearer of certainty. I think we’re all clear that the impacts of the virus are going to be felt for a long time to come.

Which leads us to Brexit – certainty appeared to have been secured, at least in part, by the deal agreed before the end of the year, however as we know the deal did not include services, and specifically when it comes to the mortgage market, we are starting to see some of the fall-out from the UK departure.

Advisers with ex-pat clients may well have a number of issues to address because of this. Last week, The Times published an article highlighting how lenders have already started to introduce new measures which, in some cases, could create a new breed of ‘mortgage prisoners’.

For instance, I’m told that TSB has stopped landlords with overseas addresses who own rental property in the UK from switching to a new deal, as well as those who own property in Northern Ireland but live over the border in the Republic. Of course, they wouldn’t lose the mortgage but can’t transfer to TSB’s better rates and would have to pay the SVR. As yet, this is purely for buy-to-let properties but there appears to be a growing concern that this net could be widened.

The article also mentions the Newbury Building Society’s decision to stop borrowers living in the European Economic Area (EEA) from switching to other product options when their deal ends, and Santander which now requires both residential and buy-to-let mortgage applicants to be UK residents, and citizens of the EEA and Switzerland will need to prove they have the right to live in the UK if they want to buy with less than a 25% deposit.

Finally, market comments suggest a growing nervousness from lenders about lending to those who live in the EU because the institutions are still attempting to work through the full implications of Brexit on such decisions. Given the new nature of the Brexit outturn, you can understand lenders wishing to be cautious even though it will undoubtedly leave many UK advisers having to reassure clients and search for a solution.

As we can therefore see, 2021 doesn’t look very different at all in terms of two of the major influences on our lives and our marketplace. Keeping on top of these developments in terms of how you continue to trade and stay safe, while also recognising the client types who might be impacted, will be crucial. We will certainly be supporting our AR firms to allow them to work as smoothly as possible through the year – make sure you have all the resource and support to do likewise.

Rob Clifford is Chief Executive of Stonebridge

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