Bank of Ireland takes €937m Covid hit
The lender which operates as Bank of Ireland UK in this country, said underlying losses had also been driven by lower operating income on top of credit losses.
In a downbeat outlook, the bank said it expects large falls in GDP and employment in both Ireland and the UK compared to 2019, before a return to economic growth in 2021.
Overall, the group was at a €669m underlying loss before tax for the period, with gross new lending of €7.1bn which was €0.6bn lower when compared to the same period in 2019.
In the UK specifically the lender said it had increased the distribution reach of its ‘bespoke’ mortgages proposition in 2020, as part of the reposition strategy towards higher margin business.
Existing customers have also been provided with improved access to self-serve online, including online mortgage offers.
The UK arm of the company reported an underlying loss before tax of £145m for the six months ended 30 June 2020 from an underlying profit £80 million in the same period last year.
More than 66,000 UK customers received payment breaks across the group’s lending portfolio.
In a statement, Francesca McDonagh group chief executive, said: “Covid-19 has had a material impact on the group’s financial performance and outlook.
“The changed economic environment in Ireland and the United Kingdom (UK) has resulted in lower levels of economic activity, credit formation and business income.
“Higher levels of credit impairment charges and reduced revenues from the lower-for-longer interest rate environment also weigh on the group’s earnings.
“Brexit uncertainty continues to impact consumer and business confidence and activity levels.
“While aspects of our outlook are more positive than when we presented our Q1 trading update and we expect further economic recovery in the second half, we continue to expect large falls in gross domestic product (GDP) and employment in both Ireland and the UK compared to 2019, followed by a return to economic growth in 2021.”
Paragon business picks up as buy-to-let market begins recovery
But the lender cautioned it is still early in this stage of the crisis and “uncertainty will remain for some time to come”.
In the nine months to the end of June, Paragon’s mortgage advances have fallen 13 per cent, while commercial advances fell 12 per cent over the same period.
The group’s buy-to-let pipeline recovered from its low point of £598.7m at the end of May to reach £651.3m at the end of June and currently stands at over £700m.
The recovery in new business flows following the Covid-19 lockdown has been encouraging, the lender added.
New activity in the commercial lending division has also seen improvements in recent weeks, with continued resilience and growth being seen in development finance and a stable position in SME lending, Paragon said.
Just under 21 per cent of the group’s loan balances have had a payment deferral at some stage as a result of Covid-19, of which, to date, around 75 per cent have not requested any further support.
Paragon said the full economic effect of Covid-19 remains uncertain and it is therefore difficult to provide guidance for the year.
Nigel Terrington, chief executive (pictured), said: “Our people and operations have shown considerable resilience, agility and adaptability during this difficult period.
“New business flows have picked-up from their April lows and with improving performance in customer payments no additional overlay provision has been required.
“There may well be further challenges to come from this crisis, which we are well placed to deal with. We have strong levels of capital and liquidity and are well placed to develop our core businesses as well as make the most of any potential opportunities that will arise in future.”
Scottish Widows Bank pilots equity release mortgage
The product is only available to intermediaries with distribution limited to Age Partnership and is soon to be launched with The Equity Release Experts – part of Key Group.
The deal is designed to allow borrowers to use equity in their home to help family members on to the housing ladder or supplement their retirement income.
Claire Scott, head of business development at Scottish Widows Bank (pictured) said: “As part of our ongoing commitment to the mortgage market, we continually review our offering, introducing new products and services as customer needs continue to change.
“People are living and working for longer, and as a result they are also facing new choices when it comes to planning for their financial future.
“Offering a mortgage with the option to unlock some of the equity in their property gives customers greater choice to help make the most of their assets in retirement.”
House prices spring back as stamp duty cut set to boost values further
Values leapt by 1.7 per cent month on month, reversing the falls seen between May and June, according to the Nationwide house price index.
The lender predicted the stamp duty holiday will provide a further boost to prices in the coming weeks.
The average home value in the UK now stands at £220,936, according to the index.
Nationwide chief economist Robert Gardner said: “The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.
“The rebound in activity reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing.
“Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.
“These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward. However, there is a risk this proves to be something of a false dawn.
“Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
Stamp duty little benefit to first-time buyer
Home movers will reap the biggest benefit of the stamp duty holiday, Nationwide’s analysis showed.
Buyers in London and the South East where house prices are high will also save more than other parts of the country.
Gardner said: “Typical savings are likely to be fairly modest for the majority of buyers in the north of England, Scotland and Northern Ireland.
“In Wales, the previous lower threshold for LTT of £180,000 was already above the average house price in the principality.
“Moreover, some of the stamp duty saving is likely to get passed on in terms of higher house prices.
“The stamp duty holiday is also likely to lead to increased volatility in transactions levels, especially around the end of the holiday, which in the past has led to significant spikes in activity.”
Tomer Aboody, director of property lender MT Finance, added: “Nationwide points to a busy and productive July, which is great for a property market which had been so static for most of the year.
“It’s no coincidence that this uptick has come at the same time as the introduction of a stamp duty holiday on purchases up to £500,000.
“Brexit and Covid-19 aside, stamp duty has been the biggest negative influence on the housing market in recent times since the introduction of higher rates on more expensive properties.
“This has to be resolved and dealt with, or whatever bounce we have seen in the past few months will only be a temporary one. The government not only has to look to extending the existing holiday but possibly making it permanent, while also looking at benefiting the higher end also.”
Crystal appoints Jason Berry as sales and marketing director
He initially joined the business as interim group sales director at the start of the year but has now accepted the permanent and expanded role, as well as a place on the executive team.
Berry (pictured) has helped steer the company through the recent challenges posed by the coronavirus pandemic, the packager said.
In his new role he will lead the CSF field and telephone sales teams plus take responsibility for distribution and sales strategy.
He will also take on the company’s established marketing function where he will work alongside industry consultant, Paul Hunt.
Berry previously held the role of director of sales at fintech insurance specialist Uinsure from 2012 to 2019, before which he led the sales channel for Platform Homeloans.
He said: “This year has been a tale of two halves, with sales records set in Q1 followed by survival and pivot in Q2.
“During this time, I have been incredibly impressed with Crystal’s leadership team and observed thoughtful and well-considered decision making throughout, making it an easy decision to take a permanent, expanded role.
“Enormous potential exists and I certainly look forward to using my experience to ensure ambitious plans are achieved.
“Technology will play a big part in our future delivery with enhancements soon available which make submitting cases easier and processing quicker. I look forward to working closely with great people and having some fun along the way.”
Jo Breeden, managing director at CSF added: “Getting Jason to join Crystal back in January was a real coup, and having him on board has undoubtedly helped during a tricky year of trading.
“I am passionate that we deliver brilliant customer outcomes every time and also ensure that our broker partners have an engagement which encourages them to return time after time. Jason will play a huge part shaping our proposition and drive the business to new heights.”
Lloyds reports surge in mortgage applications but Covid-19 set to cost lender £5.5bn in 2020
Mortgage applications in June outperformed the same period last year, as the restrictions on the housing market eased, the bank said in its half yearly results to the end of June.
However, the lender said it was not certain whether this was “a sustainable development or reflects pent up demand”.
The bank highlighted the uncertain economic outlook and increased provisions for losses by more than £3bn.
Lloyds said the impairment charge is “largely for assets that have not currently defaulted” and the overall cost “will depend on the severity and the duration of the economic shock experienced in the UK”.
Overall, Lloyds reported a statutory loss before tax of £602m.
The group said lending for the period was broadly flat, but net income came in at £7.4bn, down 16 per cent, which reflected lower rates and action to support customers.
Arrears increase as repossessions paused
The number of mortgages more than three months in arrears increased to 1.6 per cent from 1.4 per cent.
The lender added the group has suspended all repossession activity on mortgage accounts until 31 October 2020, as a result the volume of cases in late stage arrears has increased.
But Lloyds said its mortgage portfolio is heavily weighted toward high quality lending, with the average mortgage loan to value (LTV) at 44 per cent.
The new business average LTV was at 63 per cent, and around 90 per cent of the portfolio has an LTV ratio of less than 80 per cent.
More than 472,000 payment holidays for mortgages have been provided by Lloyds since the start of the crisis, with 193,000 maturing. Of those that have matured 72 per cent have restarted payments.
Around 23 per cent extended their payment holidays and the remainder are in early arrears.
Customers extending their mortgage payment holidays generally have weaker risk characteristics than those without a payment holiday, Lloyds said.
However, the average LTV for customers extending their payment holidays remains relatively low at 52 per cent, compared to 42 per cent for customers who have never taken a payment holiday.
Group chief executive António Horta-Osório said: “The impact of the coronavirus pandemic in the first half of 2020 has been profound on the way we live our lives and on the global economy.
“We remain fully focused on helping our customers and the UK economy recover, in collaboration with government and our regulators.
“I want to express my sincere gratitude to all my colleagues across the group for their dedication and persistence which have allowed us to deliver vital banking services to our customers effectively throughout the pandemic.
“Although the outlook is uncertain, the group’s financial strength and business model allow us to help Britain recover and play our part in returning our country to prosperity.
“Our customer focused strategic plan remains fully aligned with the group’s long term strategic objectives, the position of our franchise and the interests of shareholders.”
Barclays and Santander take Covid credit impairment hits
The lenders released trading updates in which the effect of the pandemic was seen on profits.
Barclays ear-marked a total of £3.7bn for credit impairment charges for the six months to end of June while profit before tax sank 58 per cent to £1.3bn for the period.
The bank has provided 121,000 customers with mortgage payment holidays, and the average loan to value of new lending was at 68 per cent, the bank said.
Jes Staley, chief executive of Barclays, said: “This has been a period focussed on supporting our customers, clients and the UK economy through the Covid-19 pandemic – providing the people and businesses that we serve with a bridge to recovery in every way we can.”
Santander profits fall 74 per cent
Santander’s UK arm has booked £376m of credit impairment charges, as statutory profit before tax tumbled 74 per cent year on year to £147m in the three months to the end of June.
The bank said income had been further affected by reductions to the Bank of England base rate and regulatory changes to overdrafts.
However, the lender said it was confident in the “resilience” of its balance sheet, with its prime retail mortgage book averaging a loan to value of 42 per cent.
The bank had granted 239,000 customers mortgage holidays over the period, with 72,000 still outstanding as of 15 July.
Net mortgage lending is set to “be in line with the market”, as it focuses on customer service and retention.
Nathan Bostock, Santander UK chief executive, said: “The Covid-19 crisis has been a huge challenge for all of us and our top priority throughout has been the welfare of our people, our customers and the communities in which we operate.
“I am extremely proud of how our people have worked at extraordinary pace to substantially change the way we operate so we can continue to provide essential banking services for all our customers, despite the material impact the crisis has had on our business operations and our colleagues themselves.
“We understand how hard it has been for our customers and we have supported many thousands of individuals and businesses with a range of measures including payment holidays on mortgages, personal loans and credit cards as well as taking an active part in Government loan schemes to help businesses through these uncertain times.”
Virgin Money and Clydesdale withdraw host of 85 per cent LTV mortgages
Clydesdale is removing five two-year fixed rates at 85 per cent LTV, as well as a five-year fix.
The deals withdrawn include those tailored for professionals and newly-qualified professionals.
Part of the same group, Virgin Money has also withdrawn select two-year deals but will still be offering five-year fixes.
The group said the move had been made to protect service levels.
A spokesperson for Virgin Money said: “We’ve temporarily withdrawn some of our 85 per cent LTV purchase products for new customers to protect our service to existing customers and applications.
“We are still offering 85 per cent LTV five-year fixed products to help support new and existing customers with small deposits and hope to be able to offer a wider range of lower deposit mortgages for new customers soon.”
It comes after a number of high street lenders this week raised mortgage rates for borrowers with low deposits.
Nationwide, Santander and Accord raise rates on high LTV mortgages
Analysis by Mortgage Solutions yesterday found average rates in this part of the market were already starting to creep up in the last two weeks and this appears to be continuing.
Nationwide is raising select tracker and fixed rates by up to 0.20 per cent on deals at 85 per cent loan to value (LTV) from Wednesday 29 July.
Santander is also upping costs on select 85 and 90 per cent LTV fixed and tracker deals by up to 0.25 per cent.
However, the lender is also shaving rates by up to 0.10 per cent on select mortgages at 80 per cent LTV, and up to 0.20 per cent on buy-to-let five-year fixes.
At the same time, Santander is withdrawing all 10-year fixed rate deals.
Accord raises rates and increases loan size
Accord Mortgages is also pushing up rates on select products between 75 and 85 per cent LTV.
The lender said it followed “significant competitor movement with the higher LTV markets”.
However, maximum loan sizes are also being increased to £2m on new lending and additional lending between 80 per cent and 85 per cent LTV.
Loans had previously been capped at £1m.
The increases are available for house purchases and remortgages and come with a £995 fee, £500 cashback and free valuation.
Nicola Alvarez, corporate account manager – propositions at Accord, said: “Borrowers have very few options when looking for larger loan products in this LTV bracket.
“We’ve therefore increased our maximum loan size to offer brokers more choice when advising high income clients looking to purchase or re-mortgage a high value property at a higher LTV.
“Accord remains committed to supporting the market and we hope these latest changes, alongside our common sense lending approach, will help us ensure we can offer a broad range of competitive products with the service brokers expect from us.”
Lending restrictions and valuations are main broker concerns post-Covid crisis
However, sentiment around the current lending environment is generally high, according to a survey by Shawbrook.
Nearly two thirds of commercial and second charge brokers were feeling confident as coronavirus restrictions ease, it found.
A quarter of second charge brokers said they had seen business volumes go up or stay the same when comparing to pre-pandemic levels, and 17 per cent of commercial brokers said the same.
Almost half of commercial brokers and around a third of second charge brokers expect investors and landlords will be increasing their portfolio in response to the pandemic.
Emma Cox, sales director of property finance at Shawbrook Bank (pictured), said: “It’s difficult to predict the outlook for the property market as we emerge from Covid-19, there are so many variables.
“However, in spite of future uncertainty, it is positive to see that many brokers are optimistic when it comes to business growth and the lending environment.
“Of course, we understand the current landscape presents a number of challenges, and some brokers will be feeling that more than others.
“This means that as we look ahead, and as we move further out of lockdown, it is more important than ever that lenders continue to work closely with the broker community to help navigate the inevitable challenges of the next six months.”