A successful vaccine rollout and gradual easing of restrictions bring the prospect of a good summer seeing friends and family after a year that has been incredibly challenging for us all.
Craig McKinlay is new business director at Kensington Mortgages
In March 2020, COVID-19 turned our worlds upside down. It forced us to stay at home and protect lives. Fast forward a year and the outlook is much brighter. A successful vaccine rollout and gradual easing of restrictions bring the prospect of a good summer seeing friends and family after a year that has been incredibly challenging for us all.
Every industry has been affected by the pandemic, including the mortgage market.
A whirlwind tour
From the start of the crisis, many people’s minds were on payment holidays, as lenders helped those whose income was affected by the pandemic. We saw payment holiday applications peak in June and then steadily decline over summer, with a slight rise in new requests during lockdowns when holidays were extended by the Financial Conduct Authority (FCA).
One of the biggest challenges the housing market initially faced was the impact on property viewings with social distancing measures. Viewings could not happen, which meant that property transactions fell off a cliff. Sellers were less keen to put their property on market and valuations were put on hold. Fortunately, the introduction of the £500,000 stamp duty holiday last July meant demand bounced back in a way we have never seen before. It was unparalleled, and needed. Our research found that the current stamp duty threshold would generate an additional 37,000 more property transactions each year if it were to be made permanent.
The availability of mortgage products fell rapidly last year. Higher loan-to-value (LTV) products were the slowest to recover from the impact of market uncertainty. Now, mortgage availability is at its highest level since March 2020, according to the latest Moneyfacts data. We also recently relaunched our 90% LTV Select offering and many other lenders have re-entered the low deposit market.
Changing needs
Competitive rates were knocked off the top spot of what brokers want from lenders. Product choice, lending criteria and service have firmly pushed pricing down the ladder. Evidence is seen through the profound change to clients’ personal and financial circumstances over the past year. For many, the necessity for top-quality advice that only intermediaries can provide has only added value to the specialist lending market. Good advice can’t be replicated by machines and algorithms.
Lockdowns have also forced a change in customer interaction, with video calls and virtual communication now the norm. There are many benefits to this for customers and brokers alike – not least the convenience it affords consumers. It has also meant that we have been able to hire from anywhere across the UK. Our underwriting team has grown by around 50% over the last five to six months. All hires have been remote, and we have plans to recruit even more underwriters remotely over the next six months.
However, the lack of face-to-face interaction has challenged organisations and mental wellbeing. Nothing beats meeting in-person to think collaboratively and bring out the best ideas. Many organisations are therefore considering a hybrid working model approach – essentially the best of both worlds.
That said, COVID-19 has amplified the opportunity and reach that digital offers. From webinars, panel discussions, to all day events with thousands of attendees, it’s evident that there’s a big upside to moving our industry online.
Despite this, our research found that 80% of brokers want to attend physical events post-lockdown, and many are keen to get back out into the world and interact face to face once more. Only time will tell, but it seems likely that a hybrid model will emerge, a combination of in-person and online interaction between customers, lenders and intermediaries. Humans are, of course, inherently social beings, and Zoom fatigue is a real thing.
The resilience and foundation of the UK housing market is something we should all recognise and celebrate. While there was a lot of doom and gloom last year when it came to predictions about house prices, the market has performed well, and prices have now increased beyond pre-COVID levels in most areas. Again, it is undeniable that the stamp duty extension is the shot in the arm. Combined with the V-shaped economic recovery that we have witnessed, the future looks bright for the mortgage market as we emerge from the pandemic.
