Slowly but surely, we are seeing shifts in the mortgage market back towards what some might describe as a pre-Covid-19 normality but is in fact a slow journey to that new environment which will continue to evolve with every passing week.
Proof of that change comes with the shifts we are seeing around adviser criteria searches fuelled by client needs and circumstances, which for some might be very different to what they were just a few short months ago.
In that respect, it’s perhaps not surprising to see brokers and customers getting to grips with frequent lender changes around maximum LTVs or determining how they are now treating furloughed workers and how this impacts on their affordability assessments.
Knowledge Bank’s recent criteria tracker for May had these two searches featuring prominently throughout the month, while understandably as the market has opened up and physical valuations are now taking place again, there has been a drop in searches for ‘internal/AVM/desktop valuations’.
With that welcome return to physical valuations, led by our sister company SDL Surveying some weeks back, we’ve started to see lender confidence rising which has manifested itself into higher LTV products coming back to market, albeit with some new (and natural) plateaus being reached. At the time of writing, one lender has today pulled its 85% LTV products, and another has returned.
It won’t surprise anyone to learn that lenders are continuing to stay away from the 95% LTV residential space for the time being, and likewise when it comes to buy-to-let, the maximum is generally topping out at 75% LTV for many.
Again, some in the sector might bemoan such a cautious and steady return to pre-Covid-19 lending criteria, but there can be no ‘quick fix’ for lenders here in terms of pushing back into higher LTV spaces. Especially, when there is still much to learn about how Covid-19 and the lockdown are going to impact on prices/valuations, and indeed what sort of demand will be forthcoming as lockdown continues to ease. Not to mention lenders’ operational capability and the need to carefully control new business processing volumes.
I think we should also be conscious – and this is perhaps something advisers will want to raise with clients – around interpretations of values and, by that, I mean how they might be looking at their properties from a pre-Covid-19 perspective.
There have been some initial indices published which suggest some localised house price reductions, yet estate agents tell us loud and clear that asking prices are holding up and that buyers are paying what sellers expect.
There are a number of further positive signs that this is a market which is in ‘recovery mode’. According to LMS, remortgage instruction volumes were up 8.1% from April to May, and its completion volumes grew by 15.5% over the same timeframe, to a point which it said was ‘approaching pre-Covid levels’. UK Finance has also been quick to suggest that demand for fixed-rate mortgages is likely to grow in the coming months.
Across all of this, and taking it into account, the advisory community is likely to see a growing number of product options for clients. Not a day goes by without a lender returning to market in a certain product area, or altering its LTV level, in order to broaden its offering and to fulfil demand and balance operational capability: it’s where a broker comes into his own – for the consumer.
As we’ve said many times this is not a credit crisis for lenders but an operational one, resulting from a health crisis. Even with the government’s announcement of a further extension for mortgage payment holidays, the anticipation has to be that lenders will find a way to cope with new business demand and stay committed to their 2020 lending ambitions.
For advisers, it’s fundamental that client needs will still need to be serviced, and after a period of lockdown it’s also likely that the pent-up demand will start to be seen in terms of increased enquiries. At Stonebridge we have been encouraging and supporting our ARs to maximise the opportunity – such that many of our member firms have been recruiting new advisers despite lockdown.
I just don’t anticipate a ‘Summer lull’ – and this is a vitally important period for all mortgage market stakeholders. Perhaps the most important one we’ve seen for over a decade – we need to do all we can to find the business and complete it and to respond swiftly to new levels of consumer demand.
Rob Clifford is chief executive of Stonebridge