How things can change, and how quickly they can change.
From a position where many in the mortgage market were suggesting the ‘Boris Bounce’ might herald a period of ongoing and increased activity, to a point where the Chancellor announces that mortgage lenders will be providing at least three-month mortgage holidays to those borrowers financially impacted by the coronavirus.
These are unprecedented times and the measures announced by Chancellor, Rishi Sunak, are also unprecedented, certainly in peacetime. I hesitate to discuss some of these because in all likelihood they are going to be superseded quickly if this crisis moves as it has done in other countries.
For now, it’s perhaps important to concentrate on the mortgage market and what it can be doing to help those borrowers. There’s no doubting that it was always going to be called upon to show forbearance when it came to borrowers who might be struggling to pay their mortgages because of the impact of the virus.
To my mind, a three-month holiday may simply not be enough for many people who – for no fault of their own – are currently not able to work or have already been made unemployed. If this crisis lasts for months as looks likely then lenders are going to need a forbearance policy that will last across this period, and we should also point out that the best option for borrowers may not necessarily be to take a mortgage holiday.
Lenders will have other options – perhaps a move to interest-only or dropping payments for a period – so it’s clearly important that advisers get on the front foot with their existing clients to help those who may be struggling to pay their mortgages to choose the right option for them.
What we perhaps should also not forget here is that we are not just talking about a lender community made up by the Big Six. It seems obvious that the bigger operators will be able to grant these options, and I have no doubt that the vast majority of other lenders will be able to do similar for borrowers impacted.
But we should not blindly assume that this will be a catch-all policy that all lenders are able to introduce. For instance, many specialist residential lenders securitise their loans and therefore their policies may, by necessity, have to be slightly different from others. Again, I’m confident that all lenders with borrowers in such a situation would be able to look at the individual circumstances and to provide a solution that suits all parties, but it is undoubtedly more complicated than many borrowers might have been led to believe.
In that sense, it’s important at this time that insurance companies like AmTrust play their role and work to support lenders and their customers as they work through the forbearance measures they’ll need to put into place. I’m sure we’re all in a situation where we want to keep borrowers in their homes and that will require action.
Plus, of course, we have the issue of buy-to-let landlord borrowers. When the announcement was made, there was something of a Twitter storm from tenants believing that their landlords would automatically get a holiday and they would not be passing it on to them.
We have had some clarity around this now, that – from what I can tell – individual landlords will be able to ask for a similar holiday if their tenant cannot pay their rent due to the impact of the virus. This probably does not extend to limited company borrowers but I understand why it is important that tenants receive the same level of protection; it’s also been announced that evictions will not be able to take place during this period.
Again, it will be interesting to see how individual lenders react to this – the issue of securitisation is as relevant here as elsewhere. However, the unregulated nature of the vast majority of buy-to-let mortgages makes it a different set of circumstances to deal with. I’m certain that – given the current environment – no lender is going to want to be taking action against landlords (and therefore tenants) if they are genuinely struggling to pay because of the virus, but it’s worth considering that blanket statements still do not necessarily mean blanket action at this time.
Overall, I think we can all expect lenders to take a common-sense approach to the situations that their borrowers may find themselves in. However, it might also be pointed out that lenders will be ascertaining their risk levels with a forensic precision and so they should be. This is a crisis which the PM himself said, “will get worse before it gets better” and, in that respect, we might all get ready for this being our ‘normality’ for far longer than we might all hope.
Patrick Bamford is business development director at AmTrust Mortgage & Credit