A lot of positive change has occurred in the mortgage market over the last 10 years and, while there will always be issues to work through, my own feeling is – for the most part – we are certainly in a far better position than we were pre-credit crunch.
Some might still refer to those pre-credit crunch times as ‘the good old days’ when, to mis-quote Cole Porter, ‘anything went’ but ultimately they were unsustainable and resulted in a considerable crash which took a long time to recover from.
In that sense, the Covid-19 pandemic may well have brought up some similar feelings to a decade ago, in terms of a seismic shock which hit, and hit quickly, causing as-yet unknown damage, but from a lending/funding perspective at least, these feel like very different situations.
As many have pointed out, this has been much more an ‘operational crunch’ rather than a credit one, albeit lenders are still going to take time to find their feet in a ‘new world’ where economic uncertainty has to be factored into their risk, and those who just six months ago may have seemed like very worthy credit risks are now left wondering whether that position still holds.
But, the starting position is much changed. Lenders still want to lend, have funds to do so, and are lending right across the board. However, a certain degree of patience is going to be required particularly at higher LTV levels, and particularly if clients are facing uncertainty with regards to their employment situation.
Where however I believe change hasn’t been anywhere near as positive is in the plight of ‘mortgage prisoners’ – how can we still have hundreds of thousands of credit-worthy borrowers, paying their mortgage each month, and yet unable to remortgage to better rates which would undoubtedly help their cause, and their bank balances, is beyond me.
New rules to identify prisoners in order to provide them with support to switch are welcome, but as much as advisers want to help – and have been asked by the FCA to help – that doesn’t mean they’re able to achieve a positive end result for the client.
I’m sure advisers seeking to help these clients, utilising our Credit Assess product, would find credit reports which might ordinarily be deemed spotless. Add in Open Banking data which would show monthly mortgage payments made over many years to the same institution, and you might begin to question your senses about how these borrowers aren’t able to get a remortgage.
But, for far too many, those product switch options are simply not available. Plus, there is no guarantee that we won’t ‘create’ more prisoners in the future. Who is to say that Covid-19 won’t see more lenders hanging up their new lending boots and looking to sell? If those mortgage books are sold onto non-lending institutions, there are no guarantees that we won’t exacerbate this problem.
At the heart of this does seem to be securing a real understanding of the credit-worthiness (or otherwise) of these prisoners. Of course, some may not have the credit record to match lenders’ affordability assessments, but I suspect many will.
What I do know is that if advisers have access to these clients and product options are available, by utilising a product such as Credit Assess, they will be able to find them a solution. The product choice and accessibility question however looms very large here, and I suspect it will need far more vigorous regulatory action in this area, before we right a horrible post-crunch mortgage wrong.
David Jones is director of Click2Check