Michelle Andrews, HSBC UK’s Head of Buying a Home, talks to Mortgage Solutions about what the bank has been doing behind the scenes to support brokers and borrowers since the outbreak of Covid-19.
By the end of March, most lenders had retreated from the 80 per cent and above loan to value (LTV) market while some banks stopped lending altogether or only accepted applications from borrowers with a 40 per cent deposit.
90 per cent LTV lending
HSBC, however, continued to brave the 95 per cent LTV lending market until 6 April before pulling back to 90 per cent LTV.
“There is strong demand for mortgages at this LTV,” says Andrews. “And I can’t say strongly enough how much we want to be there for our brokers and customers in good times as well as bad.
“When things are tough we need to make sure we make the right decisions for the bank but where there is an opportunity to do so, we lend appropriately and in a controlled manner.”
To protect its mortgage book from becoming too heavily weighted towards 90 per cent LTV lending, HSBC introduced maximum daily lending caps. But with few other banks offering high LTV mortgages, the cap is reached by mid morning, leaving brokers frustrated.
Andrews says: “It is a conscious decision for us to be in this market. We have to cap [this lending] on a daily basis in order to ensure there is an appropriate partnership between us and the brokers, with the support, tolerance and understanding you would expect when a lender can only take in so much through the door.”
The daily limits will be around for some time, and as yet the bank has no plans to increase them.
Andrews is in charge of the whole homebuying and remortgaging process at the bank. She oversees intermediary and direct mortgage lending, and to her the ‘customer’ is the broker and borrower. What she says is true of both, is that they expect a “damn good service”, all the time. Even when times are as tough as they are right now.
So when the chancellor announced on 18 March that all banks would offer customers a payment holiday, it posed HSBC a particularly big challenge if it wanted to continue to offer a good service.
The bank had never offered a payment holiday facility with any of its mortgage deals before.
Naturally this put HSBC at a disadvantage and meant that while a solution was being sought, bank staff had to take customers’ details down manually, promising to call them back.
But six days later, on 24 March, HSBC had an online form available for customers to fill in to request a payment freeze.
Building the system so quickly, when wave after wave of government announcements piled fresh challenges on banks almost weekly, is a feat that makes Andrews proud. She says the success was down to the skill of her team.
“Going into Covid-19 we had to build a payment holiday system from scratch and we absolutely had some really great people,” she says. As well as being easy for borrowers to use, it had to be compliant, in line with the bank’s risk policy and fully working, not cobbled together, so it didn’t cause problems further down the line.
The bank may have been caught on the back foot with payment holidays, but it was in an enviable position when physical valuations ground to halt.
HSBC had already begun developing its valuation process in December 2019. Andrews says that historically HSBC has always been known for competitive mortgage rates. She wanted to make sure the mortgage team’s service was at the same high standard, and stood out as much as the price of its deals.
That objective led Andrews’ team to start looking at areas such as valuations and question whether they were doing as well as they could, and start to make changes in the ways they could carry out their surveys.
She says: “We had already been looking at what we could do from an AVM and desktop point of view. So we went into lockdown in a strong position and it was easy for me to accelerate that part of plan to ensure we could cater for as many [borrowers] as we could do, where we didn’t have to do physical valuations.”
But inevitably, some applications needed a physical valuation and cases began to back up. Andrews says when she saw this start to happen, she initiated early meetings with the bank’s valuation partners to talk through how they would exit the lockdown and prioritise the most urgent cases.
When the lockdown restrictions were lifted, the bank was able to move quickly out of the blocks and by 12 June it had cleared its valuation backlog.
At the same time, HSBC stepped back into buy-to-let lending. The bank’s risk policy does not allow it to use remote valuations on buy-to-let so it paused that lending during the core lockdown months. Andrews says it was a never a conscious decision to stop lending in that market, but they had to step back while physical valuations were on hold.
While continuing to support their broker partners, Andrews’ current focus is contacting the borrowers who took early payment holidays to talk them through their next steps. The bank has contacted a fifth of borrowers who arranged a payment freeze and has a team set up to make calls to vulnerable borrowers with a mortgage holiday.