Skipton reports £3bn of H1 lending and gives mortgage prisoners membership – results
The mutual lent £0.9bn more than the same period in 2020 and grew mortgage lending by 4.4 per cent, agreeing home financing for 16,087 home purchasers and remortgagors in H1.
The group’s arrears position improved slightly during the period for accounts in arrears by three months or more to 0.28 per cent, well below the industry average of 0.85 per cent.
At a time when mortgage prisoners continue to battle for rate caps and with a government reluctant to intervene in the closed mortgage market, on 1 June Skipton effectively brought 4,535 mortgage prisoners in to full membership of the mutual.
Customers of adverse credit subsidiaries, Amber Homeloans and North Yorkshire Mortgages, which both stopped trading in 2010 with £2.5bn of mortgage accounts now down to £500m of balances, will be able to access all of the society’s remortgage options, subject to affordability checks.
Speaking to Mortgage Solutions, David Cutter, Skipton group chief executive, said it was hard to say how many of these would be able to take advantage of their new situation.
“It will be far easier for these borrowers from a customer point of view, but it’s hard to say how many will actually move. These are seasoned mortgages, so by now because many are so seasoned, we don’t expect too much.”
Group profit before tax (PBT) leapt to £159.2m up from £34.4m in H1 the year before.
Profits in the period, under both performance measures, have benefitted from a clawback of loan impairment provisions totalling £14.8m reflecting the updates to the economic outlook in light of the improving COVID-19 situation, mainly driven by the successful roll out of the vaccine.
Meanwhile, Connells completed the acquisition of Countrywide on 8 March 2021, creating the UK’s largest estate agency network of 1,235 branches. The group said the buyout ‘will provide further diversification to the group’s business model, deliver enhanced returns over the medium and longer term and improve the mutual’s capital strength when margins on the mortgage and savings side come under pressure due to competition.
It said: “The higher returns from the estate agency business will support the society’s ongoing investment in its customer proposition and its people and continue to allow it to offer competitive mortgage products to our borrowing members and competitive savings returns to our savings members, in addition to further enhancing its financial advice proposition.”
Mortgage market projections
Cutter said he expected mortgage business to tilt away from purchase towards remortgage with a lot of maturities coming up.
“There’s also an opportunity to shift business back to two-year fixed rates and we expect distribution to remain strong,” he said.
On when rates might bottom out, he said: “I expect them to decline further but when and where they bottom out to depends on lender risk appetite. I expect competition to continue this year and rates have further to go.”
In conclusion, Cutter said: “At a time of continued uncertainty for our customers, colleagues and their families, Skipton’s performance seems a secondary interest while we all adjust to the ongoing impact of the global pandemic. But it is against such a challenging social and economic backdrop that we’ve seen Skipton’s mutuality, agility, and first-rate customer service come to the fore and be reflected in our results today.”
Pressure mounts for renters, self-employed, lone parents and furloughed workers
More than twice as many people on furlough than not on furlough (17 per cent versus 8 per cent) were likely to have found it difficult to keep up with their mortgage payments. Almost a third (29 per cent) of those on furlough had used savings to pay their mortgage or rent, compared to 17 per cent not on furlough.
Around 12 per cent of people were behind with at least one household bill, with this figure to rising to 24 per cent for private renters. Tenants were most likely to be behind with utilities (14per cent), credit card payments (9 per cent) and other household bills (9 per cent).
The figures come from the English Housing Survey’s Household Resilience Study, Wave 2 with surveys taking place in November and December 2020.
In November/December 2020, 9 per cent of private renters were in arrears, up from 3 per cent in the same months in 2019-20 before the pandemic began.
Some 3 per cent of couples without children and 5 per cent of households of unrelated adults were behind with one or more household bill compared to 37 per cent of lone parents with children aged 15 or under.
Overall, 61 per cent of households reported that their income had not changed since the previous Household Resilience Survey in June/July 2020. One in 10 (11 per cent) reported it had increased by at least £100 per month. About a fifth (17 per cent) reported it had decreased by at least £100 per month.
Similar to June/July 2020, the self-employed were more likely than those employed full or part-time to report that their income had decreased by at least £100 (40 per cent of those self-employed reported this, compared to 18 per cent of those employed full-time and 23 per cent employed part-time).
More households reported having savings compared to before the pandemic, but a quarter (25 per cent) of households said that their savings balance had fallen during the crisis. More than four in 10 (43 per cent) of those who are furloughed have no savings.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The pandemic has dragged hundreds of thousands of people the wrong wide of the resilience gap, and renters, self-employed people, lone parents and furloughed workers have been hit particularly hard.
“Overall, more households have savings than before the pandemic, and 13 per cent of people have been in a position to actually put more aside, but those in full time employment and people who own a house with a mortgage are much more likely to fall into this bracket.
“Meanwhile, a quarter have seen their savings fall, and vulnerable groups are more likely to have suffered. People on lower furlough incomes and the self-employed who lost work have been less able to save. Meanwhile, those who rent are more likely to have eaten into their savings to pay rent.
“They’ve struggled with their bills too. Renters have found it far harder to pay their bills: one in 10 are behind on rent, and almost one in four are behind on at least one bill. Lone parents are most likely to have fallen behind with bill payments.
“There are no simple answers when you’re facing this kind of pressure. A year on from the start of the crisis, there are no easy costs left to cut. There are also signs that people have already made bigger changes to their lives to keep a lid on costs. Around a fifth of privately rented households have increased by at least one person, which is a sign people are moving in with others to cut costs.”
Santander to disregard 2020-21 tax year for self-employed borrowers
Instead, from 19 April Santander will base its income assessment on the 2018/19 and 2019/20 accounting periods.
However, the lender said it will need to take into account future Covid-19-related liabilities such as paying back loans or deferred tax.
And it is urging brokers to call it before submitting cases where:
- the client’s business and/or income has been adversely affected by coronavirus; and/or
- the client is using 2020/21 figures for income assessment; and/or
- the client has any future Covid-19 related liabilities.
Deduct future liabilities
In a message to brokers Santander said: “From Monday 19 April, we’ll be changing the way we assess self-employed income for all new residential applications where the business and/or income has been adversely affected by Covid-19.
“Where your client’s business and/or income has been adversely affected by Covid-19 we’ll discard the 2020/21 accounting periods (if available), and our income assessment will be based on the 2018/19 and 2019/20 accounting periods.
“It will be necessary to deduct any future Covid-19 related liabilities from the net profit/profit (after tax) as these will be ongoing costs for the business e.g. bounce-back loans, BBILs or CBILs repayments and deferred tax liabilities.”
All full mortgage applications submitted by 9pm on 18 April will not be affected by these changes.
Any applications submitted from 6am on 19 April, or where a material change is made to an application submitted before 9pm on 18 April, will be assessed on our updated lending policy.
Buy-to-let applications are unaffected by this change.
House prices set to keep rising this year – Oxford Economics
According to the housing report, a slowdown in buyer activity – as suggested by the Royal Institution of Chartered Surveyors (RICS) and the Bank of England – will see house price growth slow to zero by the end of this year. Then in 2022, prices will decline between four and five per cent.
Homeowners and high earners driving market activity
Forbearance which suppressed a rise in unemployment and propped up household incomes has allowed people to continue paying their mortgages and rent, evading the possibility of repossessions and arrears.
However, younger people or those on low incomes who have been financially impacted are less likely to be homeowners or looking to purchase. This indicates buyer activity has been driven by those who were already better off and managed to save more cash during the lockdown which contributed to purchases and fuelled higher property prices.
This was evidenced by the fact that despite the economic backdrop of 2020, house prices rose seven per cent year-on-year in Q4. This was a contrast to Oxford Economic’s expectation last summer that the year would end with price drops of 3.5 per cent.
The report suggested the launchpad from 2020’s market performance coupled with continued government support this year would result in further increases.
Government initiatives raising prices
The report said while the stamp duty holiday was primarily extended to give buyers time to complete, it expected this to lead to additional transactions and raise house prices higher.
Oxford Economic also suggested that as the government now had a stake in the market through its 95 per cent mortgage guarantee scheme, this fuelled speculation that policymakers would not allow prices to drop.
When the support ends
Unemployment is forecast to rise to six per cent later this year when schemes such as furlough and payment deferrals end. While this is modest considering the pandemic’s impact on the UK’s economic performance, the firm said this was still two per cent higher than pre-Covid levels.
Young and low earners have been disproportionately affected by the economic fallout of Covid-19, with the proportion of workers aged 18-24 shrinking by eight per cent as of February. Employment dropped by one per cent for those in the late 30s and 40s while those aged 50 and over saw a rise in employment.
And while a rebound in GDP is forecast, Oxford Economics predicts a drop in household income in real terms due to inflation and high unemployment will put a strain on people’s finances.
Again, this suggests those on lower incomes who are not property owners will be most affected by the pandemic.
While this may not have an impact on purchases and business pipeline, a drop or loss of income could impact the rental market if people fall behind payments and into arrears. Combined with the end of the evictions ban in May, this could force some landlords to sell up adding to the supply of available properties and suppressing price growth.
Furthermore, no new support for the economy is expected from the Bank of England and the report said there was “little prospect” of the implementation of negative interest rates to maintain cheap mortgage borrowing.
Additionally, recent increases in swap rates and the possibility of higher write-offs on past loans could cause lenders to ration credit, leading to a modest rise in mortgage interest rates.
It said: “With the outlook gloomier for low income, mainly non-homeowning households than for better-off groups, the risks are probably skewed towards a smaller correction in property prices than a larger one.”
Construction only bright spot as economy reverses in January
Figures from the Office for National Statistics (ONS) show that January’s GDP was nine per cent below the levels seen in February 2020, compared with four per cent below October 2020 (the initial recovery peak).
Lockdown restrictions were in place to varying degrees across all four nations of the UK during January.
Overall, all main sectors of GDP remained notably below their pre-pandemic levels in February 2020 and all were lower than in October 2020.
However, the fall of 2.9 per cent in GDP was better than the figure of nearer five per cent expected by economists.
The services sector acted as the main drag on growth in January, decreasing by 3.5 per cent as restrictions on activity were reintroduced in response to the coronavirus pandemic. The services sector was 10.2 per cent below the level of February 2020 compared with 4.9 per cent below the level seen in October.
Derrick Dunne, CEO at Beaufort Investment, noted the services sector was always due to be a drag on numbers.
“Production and construction fared relatively well, with a fall of only 1.5 per cent and growth of 0.9 per cent respectively. But these were merely brighter spots in an otherwise gloomy picture,” he said.
“In a very real sense, the events of 2020 continue to haunt the economy, with GDP still nine per cent below its pre-pandemic levels.”
Kevin Brown, savings spokesman at Scottish Friendly, said: “We expect a household spending boom throughout spring and summer which could help push the UK’s economic output back above pre-pandemic levels.
“This will provide a much-needed shot in the arm for many businesses but it could potentially hurt some households in the long-run.
“If inflation rises sharply above the Bank of England’s two per cent target then families who have savings held in bank or building society accounts will see the value of their cash quickly eroded. We need to keep a watchful eye on the rate of consumer spending from April onwards to ensure that households don’t pay the price for driving the UK economy forward.”
Eviction ban extended – but still no financial support for tenants
Renters will only have their homes possessed in the ‘most serious circumstances’ such as incidents of fraud or domestic abuse.
The requirement for landlords to provide six-month notice periods to tenants before they evict will also be extended until at least 31 May. It was previously due to end on 31 March.
Housing secretary Robert Jenrick said the measures will be kept under review in line with the latest public health advice.
Richard Lane, StepChange director of external affairs, said: “The government’s continued suspension of rental evictions until the end of May is a welcome step which will gives renters affected by the pandemic vital time to get back on their feet.
“However, renters are among the groups hit hardest by the pandemic, and many of those struggling have fallen well behind on their rent or resorted to borrowing to get by. With wider restrictions due to continue until at least the end of June and the economic effect of the pandemic expected to go on well beyond that, renters have little hope of a return to anything like normal by May.
“Without targeted financial support, many renters are at risk of losing their homes. We need urgent action to prevent homelessness, housing insecurity and long-term problem debt from taking hold when the newly extended suspension is lifted.”
Ben Beadle, chief executive of the National Residential Landlords Association, said: “That said, the further extension to the repossessions ban will do nothing to help those landlords and tenants financially hit due to the pandemic. Given the cross-sector consensus for the need to address the rent debt crisis, it suggests the government are unwilling to listen to the voices of those most affected.
“If the chancellor wants to avoid causing a homelessness crisis, he must develop an urgent financial package including interest free, government guaranteed loans to help tenants in arrears to pay off rent debts built since March 2020. This is vital for those who do not qualify for benefit support. Without this, more tenants face losing their homes, and many will carry damaged credit scores, making it more difficult to rent in the future and causing huge pressure on local authorities when they can least manage it.”
Both the NRLA and StepChange are calling for a financial package from the government that helps tenants deal with their rent arrears through a system of grants and no-interest loans.
The Scottish government announced this week that it was extending its support for landlords and tenants, a package which includes interest-free loans.
Repossessions to resume from April, proposes FCA
In an update to its draft guidance for the support of mortgage customers, the regulator said repossessions should be a last resort and borrowers were still entitled to tailored forbearance if needed.
The FCA said firms should continue to act in accordance with MCOB 13 and only consider any payment deferrals as arrears once a mortgage holiday ends and the next payment is missed.
Lenders should also clearly communicate with customers to reach an agreement to repay any money owed on the mortgage before considering the seizure of a property.
Unless a customer is unreasonably refusing to respond to communication, a property should not be repossessed without a borrower’s consent solely because of a shortfall resulting from a payment holiday.
To ensure a repossession is fair and reasonable, lenders should consider whether the mortgage holder or a member of the household would be put at risk of coronavirus if they were evicted.
If a risk is identified, the repossession should not go ahead until it is deemed safe to do so. Also, tenants should not be asked to vacate a property during self-isolation.
The FCA has asked for feedback on the guidance update by 10am on Wednesday.
Two more tranches of help promised in budget for the self-employed
The fourth self-employment grant will stay at the current level covering February to April, offering up to 80 per cent of trading profits or £7,500 over three months.
For the fifth grant, available from July, people whose turnover has fallen by 30 per cent or more will continue to get 80 per cent of average profits; those whose turnover has fallen less than 30 per cent will receive a 30 per cent grant.
The Treasury said last year that a fourth grant would cover the months of February to April. But self-employed workers have been frustrated about the lack of detail about the scheme, despite the grant period having already begun.
Eligibility of the SEISS grants has also been widened to include about 600,000 people who became self-employed in the 2019-20 tax year, as tax return data for 2019-20 is now available. These workers were excluded from previous grants as you needed to have filed a tax return for 2018-19 to apply.
However, many workers who have not received any government support so far will still be excluded from financial help.
These include directors of limited companies paid by dividends, anyone newly self-employed, freelancers paid via PAYE and workers earning more than £50,000 a year.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The extension of the self-employment grant to those who have just submitted their first tax return will come as a huge relief. The last year has been an incredible struggle in impossible circumstances without government support beyond Universal Credit. They will finally get more of the help they so desperately need.
“However, this doesn’t help all of those excluded from government schemes. There’s no respite for self-employed people with profits of over £50,000 or who receive less than 50 per cent of their income from self-employment, who will continue to battle on. It must seem even more unjust that the scheme is scooping up hundreds of thousands more people, and still leaving them behind.”
Adapting the advice process to protect you and your clients – Wilson
I’ll be the first to say this is challenging and the current lockdown feels perhaps even more difficult because, once again, we have little idea of when it might be eased.
Talk of this continuing until Easter will I’m sure have been incredibly disheartening to many, but we must plough on and hopefully we can support each other in doing this.
We have been trying to do that by holding regular weekly breakfast meetings, inviting advisory firms, providers and others to share their experiences of working again in a lockdown situation, plus utilising all their experience to help with process, individual cases, product options and so on.
What has come up regularly is the ways and means by which advisers are currently working with clients remotely when the sector has traditionally been reliant on face-to-face meetings.
Of course, those are simply not possible at the moment and, it’s fair to say, advisers have needed to utilise online meetings, email and telephone in lieu of those.
It’s been obvious from the conversations we’ve had that some advisers have needed to rethink their process in that regard.
Adapting the process
In a sector which relies so much on soft skills, connections and communication, how do you draw those important elements into your lockdown advice process?
How do you ensure everyone is comfortable with the arrangements, you have all the information required to satisfy yourself as an adviser and ensure you are meeting compliance requirements?
Ideally, you would perhaps like to have a half-way house approach.
One that obviously has to begin with online/phone/email communication but, hopefully can move smoothly back into a potential face-to-face meeting where the adviser can fully explain everything, go through the paperwork, communicate with the client and family.
But, who knows when that might be possible? We might be looking at many months before that’s achievable and even after that point.
And we have to recognise as an advice profession that some clients may still not be comfortable with meeting face-to-face, even after the vaccinations have been rolled out to the entire population.
On the record
One option we are suggesting – which might become an integral part of the advice process anyway – would be to ensure all communications, particularly online meetings, are recorded.
This obviously provides a full record of the client interactions which can be kept on file, but it also offers the adviser a chance to go back and review their own first impressions during those meetings. Just to double-check all the information provided, and to help further your understanding of client motivations, needs, and such.
Face-to-face meetings are often very useful in highlighting certain soft facts and by recording all interactions, not only do you have the chance to review, but you can also go back to the client on any potential issue that is highlighted by a meeting review.
It’s all about threading new ways of working into the process to get the right result and to ensure everyone is comfortable and confident with the recommendations you come to.
This is a twist on the traditional routine but it may provide more cover for you and the client over the course of your interactions.
Poll: How are you feeling one-year into the pandemic?
Almost everyone in the country has been or knows someone who has been touched by its health effects while the mortgage industry has lost its own colleagues to Covid.
In addition, the repeated lockdowns and restrictions on movements and daily life are hitting everyone hard. So Mortgage Solutions is asking how its readers are coping now.
The UK’s pandemic is one year in and has hit everyone hard becoming one of the most severe outbreaks in the world. How are you feeling?