First published by Mortgage Solutions
There are few Government measures aimed at the mortgage market which don’t have far-reaching (and indeed potentially unintended) consequences.
For example, while few in our sector would argue against the logic of introducing of mortgage payment holidays back in March, it’s a simple fact they were imposed on banks and building societies with little notice, and caused considerable operational strain for lenders as they sought to deal with the enormous volume of requests received.
That meant, at a time when offices were forced to close and businesses moved to remote working – which for the vast majority is still the case today – the resource demands caused by the Government interventions meant that something had to give elsewhere.
This is the reason that large numbers of lenders revised criteria and product pricing in order to cope with the mortgage payment holiday issue. Most lenders generally managed this consistently, dealing with the influx of requests, and since then we’ve seen a slow return of their appetite to lend, including a gradual return to >80% lending.
Four months on however, the Government/UK Finance has recently announced the availability of further payment holiday extensions for those who have already taken one and, for those who haven’t, they now have until the end of October to request one.
It’s likely to mean that operational capacity which had been ear-marked for other lending-focused activities, such as new business processing may now have to be redirected back to mortgage payment holiday workloads.
Leaving aside the ongoing debate about what sort of impact taking a mortgage payment holiday extension may have on a borrower’s credit score, a key question is how this might now impact on lenders’ servicing of new business, and what this may mean for brokers and their clients in terms of product choice and access to funds.
You might suggest I’m putting two and two together and getting five here, but in the last few weeks we’ve seen a number of lenders pulling back from 90% plus LTV lending.
Now, this might purely be a demand and supply issue – we are nowhere near back to ‘normality’ in terms of the number of lenders active in the higher LTV part of the market – but Accord has suggested it has also made this decision based on servicing issues and wanting to maintain its levels.
Controlling application volumes, especially when you’ve had to divert resource to unexpected requirements of the market such as mortgage payment holidays, is a natural step for these lenders in these circumstances, but will undoubtedly mean less product choice.
And, of course, the knock-on effect is bound to be seen. If you’re one of the few lenders still active at 90/95% LTV now then you’re going to see demand increase, which again puts pressure on resource/servicing, and may result in a similar interventions being made such as lenders trying to quell demand by revising pricing or criteria. It’s a real concern.
While we of course understand the Government’s desire to avoid a cliff-edge scenario for borrowers when it comes to payment holidays, there has to a realisation that this will have an impact in different areas of the mortgage market.
It makes that much longed-for return to ‘normality’ more difficult and puts lenders under pressure to respond to the needs of existing borrowers, while at the same time seeking to attract new lending in order to support strengthening of the UK economy and drive forward the housing market.
The point is that, they can’t do it all: the likes of HSBC deserve special mention for remaining at higher LTV throughout COVID-19, but ,for all lenders, something is already starting to give. The next decision about payment holidays may well need to be a different one in order to make the wider market progress we and consumers all need to see.
Rob Clifford, Chief Executive of Stonebridge
