You can research the housing and mortgage market and see very little difference from one iteration of your research to the next; indeed, you might well say, that a significant degree of certainty and stability around the market is actually welcome.
When he was Chancellor, Gordon Brown, once proclaimed he would put “an end to boom and bust” in the economy – that might prove possible over a very short period of time, but as we have seen over the last two decades, it does not preclude there being some deep economic troughs which can undo even the most stable of economic plans.
Within 12/13 years we have now had two major events – the Credit Crunch and the Covid-19 pandemic – which have not just upset the apple cart but smashed it to smithereens. It is of course too early to predict just how detrimental the coronavirus will be to the UK economy, and the housing/mortgage markets in particular, but given the level of government intervention required, it seems obvious to remark that the repercussions of this will be felt for many years to come.
In the mortgage market, those repercussions have been felt in double-quick time. At the time of the Credit Crunch, there was a feeling of a steady and slow descent into oblivion; this time, the impact has been (to quote Thomas Hobbes) ‘nasty, brutish and short’. Although whether the timescale is ‘short’, remains to be seen – we can but hope.
AmTrust’s own quarterly iteration of its LTV Tracker research has coincided with this period, and the results – a two-thirds drop in product numbers for both 75% and 95% LTV first-time buyer borrowers – are therefore not unsurprising. Lenders, like all businesses it has to be said, have needed to act quickly and decisively, especially when they have had to prioritise fulfilling mortgage payment holiday requests over new lending.
At a time when many staff would have been working remotely, and with some specialists in particular needing to ensure the survival of the organisations themselves, some things have needed to give. Add in the difficulties in actually purchasing a property, and moving into it, and you can fully understand why first-time buyer mortgage products have been cut in such larger numbers.
However, and here is the positive to grab hold of, it’s important to recognise that product numbers are from a moment in time and that, even in the immediate days after we ran the research for the LTV Tracker, there were a number of lenders effectively returning to the market by inching up their LTVs and launching new products.
Plus – something that we have continued to stress in recent years especially with regard to 95% LTV products – numbers don’t necessarily translate into lending. And vice versa, a significant drop in product numbers might not mean a corresponding drop in lending – for instance, a two-thirds drop in products doesn’t mean we can predict a two-thirds drop in lending activity.
What we can say is that, quite rightly, lenders have had to prioritise. As soon as the government announced the availability of three-month payment holidays, this is where the focus had to be. Now, a few weeks after this was first announced, one gets the feeling that lenders have got on top of this requirement, and are therefore able to look slightly beyond this, especially in terms of their appetite to lend.
So, while we’re not seeing those who pulled out of 95% LTV lending coming back to that level yet, what we are seeing is a push back into 80%/85% loans; not forgetting the fact there are lenders who have maintained their higher LTV product ranges anyway. First-time buyers who only have a 5% deposit, do still have product options – as we noted in our research these are generally back to the levels we saw at the end of 2017.
However, and this is a personal opinion, I don’t see a post-Credit Crunch environment playing itself out, specifically in terms of mortgage lending and product availability. Lenders are, just a few weeks into this crisis, already upping their involvement – something which, quite frankly, took many years post-Crunch.
With each passing day and week, we move forward – not to a pre-virus normality but a different kind of normal. However long this current period lasts, it will not last forever. Those working within our sector are already looking at the future, and from that I take great heart and positivity – we shall certainly be helping our lender clients to continue to do this, and wish everyone well in facing these existing challenges and those that may come after.
Patrick Bamford is business development director at AmTrust Mortgage & Credit