To date, some 2.6m deferrals have been granted and with the recent news that the scheme is being extended to July next year, this number looks set to increase even further.
The scheme has undeniably acted as a lifeline for many borrowers struggling financially as a result of the Covid-19 pandemic. However, as a result, processing the deferrals has been a huge undertaking for lenders and has increased pressure on their resources at a time of already reduced capacity and disturbance.
This has resulted in manpower being drawn away from other areas of lenders’ business, such as processing mortgage applications and helping first-time buyers. Moreover, as they struggle with constrained capacity, high-LTV lending is being reduced. This not only impacts the market generally, but disproportionately impacts younger borrowers, who are already suffering the worst financial impact from Covid-19.
Brokers have also been on the front lines when it comes to explaining the potential consequences for those borrowers looking to defer. However, the real impact of payment holidays may only start to come to light as those who have taken one look to remortgage and complications arise.
Very little was known in the early days – and arguably still is – as to the ramifications for those taking advantage of the scheme, other than the fact that it wouldn’t leave a mark on their credit score.
How lenders will view a recent mortgage holiday when a client looks to remortgage is not set in stone, but there is a strong likelihood it will not go in their favour when it comes to assessing affordability.
As borrowers are unable to carry over their mortgage deferrals, those currently on a mortgage holiday and seeking to remortgage may therefore find themselves stuck, with a product transfer their only option.
Brokers’ expertise will be vital here – but only if they have the right tech available to give them the time to step in and help.
More challenges yet to come
In an already busy market, time management will need to become an even bigger priority for mortgage brokers moving forward. For example, brokers could potentially face a lot of dead-ends when contacting clients nearing the end of their fixed rate deal, as many still be on a mortgage holiday and thus unable to remortgage.
Activities like these not only waste brokers’ time, but can also damage their service levels. There will also be borrowers coming off a payment holiday who face reduced purchasing choices and who need specialist advice to get the right deal – only brokers can offer this, and they need to be ready to step in and pick up the pieces.
A digital hand
As with most things, technology can really help here, as the right tech platform can help brokers organise and manage their client relationships more effectively. The truth is that brokers need more than just a customer relationship management solution.
They need to provide a consistent, repeatable, efficient and fast process for the entire mortgage journey, which will mean centralising and automating their workflows.
Automatic reports, updates and correspondence not only set the timeliness of communications with clients, but also the tone.
As a result, brokers can focus on serving their clients and promoting the areas that bring the biggest revenues, such as new business leads or upselling protection, rather than chasing empty remortgage leads.