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HOW COVID-19 HAS SHAPED THE MORTGAGE INDUSTRY AND TAUGHT US LESSONS FOR THE FUTURE

Written by Richard Tugwell, Director of Mortgage Distribution at Vida

Covid-19, the pandemic and lockdown(s) meant 2020 was an extraordinary year. While the start of the pandemic resulted in the biggest economic fall on record at almost 20%[1], Government intervention resulted in a strong recovery in the second half of the year in the housing and mortgage markets, which led to a feeling of optimism amongst many. However, no sooner had the new year begun, than any thoughts of 2021 representing some kind of break from 2020 were dispelled pretty quickly by the decision to introduce lockdowns across much of the UK. Thoughts of those in the property market turned to the Spring of 2020 when the housing sector ground to a halt overnight. However, the Government stimulus package provided since the start of the Covid-19 crisis has helped the majority of households to maintain financial stability; and this coupled with a boost in demand of homes across the UK resulted in a positive outlook for 2021.

During the first five months of 2021, lending for house purchase were not only 87% above the same period last year but 51% above the same period of 2019. [2]As an industry this resulted in some of our busiest months in history, helped by stamp duty holiday, end of the first Help to Buy scheme, increased demand from home movers with changing homeownership ambitions, the value of advice was never needed more. However, this hasn’t come without it challenges and we, amongst others, suffered unprecedented volumes resulting in falling outside our SLAs. But we tackled this issue head on, undergoing an upheaval of our processes, streamlining our underwriting processes, as well as improving our price competitiveness. We’ve learnt a lot in the last year and we are focused on making constant improvements to the intermediary and customer experience.

We have seen a more fundamental shift in behaviour linked to the pandemic, pointing to the impact of the homeworking trend and high levels of housing wealth. The various lockdowns forced people to revaluate their homes and desire more space to accommodate the remote working environment. A decade of uninterrupted price growth has allowed many to leverage their substantial equity stakes and look to sell up and move. This trend was reflected in the latest ONS statistics in that house prices have soared by 13.2% or £31,000 in the year to June, marking the highest annual house price growth since 2004.

With demand in the private rented sector at record-breaking levels, there has also been strong demand for mortgages from buy-to-let landlords. With the full effects of the changes to mortgage interest tax relief now in place, landlords continue to seek value and yield to maintain profitability across their portfolios. Lenders such as ourselves are well-placed to support intermediaries and landlords with these specialist requirements. The popularity of Buy-to-Let doesn’t look like its ending anytime soon, with IMLA predicting buy-to-let lending to be £2 billion higher than previously forecast at £42 billion. We now expect £13 billion of house purchase buy-to-let lending in 2021, the best year since 2016[3].

With so many changes taking place in the market, we are committed to making our processes as easy as possible, providing a great range of product options for our intermediary partners. With this in mind, we launched our intermediary product switch portal which provides brokers with a seamless and simple way to undertake a product transfer for their clients. Product transfers are at an all-time high, and this is set to continue, so launching our best of breed product switch portal means brokers will be able to complete the product transfer journey in less than 15 minutes with everything completed online. Vida trailed this with some broker partners and have had great feedback both at the trail and since the launch.

Looking ahead, the future for the mortgage market looks strong, in light of the high levels of market activity IMLA has raised its forecast for mortgage lending from £283 billion to £285 billion in 2021, with house purchase being the main driver.

As a lending specialist we want to focus on a number of areas that are important for brokers such as Limited Company Special Purpose Vehicles (SPVs) and solutions for those types of properties not considered by high street lenders.  With portfolio landlords still keen to expand their catalogue of properties, they are having to also expand their horizons to specialist properties available on the market. But what makes a property a specialist property?

Vida classes a specialist property as an HMO/MUB, Student Lets, high-rise flats, ex-Local Authority flats, and flats above a commercial premises, for example a retail unit, office space, dry cleaners, nail parlours, restaurants, hairdressers etc.

At Vida we continue to embrace cutting edge technology by reviewing our end-to-end origination system to make it even easier for intermediaries to do business with us, we also have a number of further enhancements planned for the rest of this year. We want to support our brokers in a seamless journey as we shift away from traditional working methods. We are also aiming to simplify our product range, to ensure brokers and their customers have the best experience possible and are supported when managing increasingly complex cases.

This is an exciting time for our industry, filled with both challenges but also great opportunity. The specialist lending sector has many different moving parts and additional layers of complexity will continue to emerge from an economic landscape which never sits still and a progressive housing market. Helping brokers and their customers understand their choices and options in an ever-changing market is something we are committed to do and Paradigm is certainly working with our us and our peers to support intermediaries and their customer’s ambitions here. The future looks more promising than it has done for some time, but we shouldn’t forget the last 18 months and the lessons it has taught us. It has accelerated positive change that will benefit our industry in the long-term. The resilience we have shown has prepared us to handle whatever comes our way next.

 

[1] https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/coronavirusandtheimpactonoutputintheukeconomy/june2020

[2] http://www.imla.org.uk/resources/publications/impact-of-covid-on-uk-housing-and-mortgage-market-one-year-on.pdf

[3] http://www.imla.org.uk/resources/publications/the-new-%60normal-prospects-for-2021-and-2022-1.pdf

 

 

CONTACT 01277 508959 FOR FURTHER INFORMATION OR TO DISCUSS AN ENQUIRY

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