Given the nature of the change to the mortgage market over the last couple of months, and in comparison to the significant uptick we enjoyed during January, February and early March, it might seem like we are making relatively slow progress towards a ‘new normal’ but in fact there have been a number of positives to take in recently.
Let’s be frank, we are a long way from those pre-COVID-19 days, but with every week – and certainly since the 10th May Government announcement of some relaxation of lockdown in England and the guidance that has followed regarding those professions who need to work in people’s homes – we have jumped forward at least a couple of paces.
Perhaps pre-eminent in that progress has been the fact that some surveying operations have now been able to return to physical inspections of properties. Our sister company, SDL Surveying, was probably the first major national firm to do this yesterday and I don’t think we, in the mortgage market, can under-estimate just how positive this is.
Lenders do, of course, have a significant backlog of inspections to be completed by their surveying partners such as SDL, but if others are able to follow our group’s lead here and we can move to a point where that backlog is exhausted, we are then able to see new cases/properties inspected, then this clearly presents a renewed opportunity for lenders to refresh their lending appetite and attract new business from brokers.
Indeed, we’ve already started to see this in the mainstream sector, where those lenders who – some say prematurely – cut back their LTVs are now inching their way back towards their natural risk appetite. At its nadir, we had effectively ‘lost’ 8,000 mortgage market products dropping down to 6,000 in total but, by the latest reckoning, we are now motoring towards 9,000.
From only offering 60%-65% LTV products, the mainstream sector is back up at 80% to 85% LTV now and the anticipation is that the return to higher LTV lending will happen. Lenders have the capital and they certainly want to lend, plus we’ve seen a greater number of brokers producing quotes for ‘higher LTV’ products in recent weeks, suggest a continuing demand and appetite for these products from consumers despite the uncertainty caused by COVID-19.
The news that physical inspections are back (and consumers are welcoming them) should also inject some real fuel into the mortgage market machine, especially for those specialist lenders who only accept physical valuations some of whom have therefore been pushed out of the market by the lockdown. Particularly in areas like buy-to-let, but also specialist residential lending, we’ve seen a number of lenders effectively shutting up shop, and a return to physical valuations should give them – and their funders and investors – one of the features which could enable a return to lending.
On top of this, it looks likely that mortgage borrowers might well benefit from lender repricing. We can’t ignore the fact that Bank Base Rate (BBR) is currently just 0.1%.
Recent statistics from Moneyfacts suggest the average two-year fix rate, across all LTVs, has fallen by 0.34% to 2.09%, while the average five-year fix is now down to 2.35% from 2.66% in March. It is only at the 95% LTV level that rates have remained static or increased, which clearly reflects the scarcity of product and lenders deliberately staying away from higher LTV products for the time being.
That, as mentioned however, will change and may do so in a quicker timeframe that some might have envisaged at the start of lockdown. There’s no doubting that the mortgage market will take time to get back on its feet but we’ve had some hugely encouraging news in recent days, and the options available to advisers and their clients are growing nicely.
Let’s ensure we keep on top of these developments and use all that positivity to grow business and income levels – that should remain a priority for all regardless of what happens next.
Rob Clifford, Chief Executive of Stonebridge