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In an update to its draft guidance for the support of mortgage customers, the regulator said repossessions should be a last resort and borrowers were still entitled to tailored forbearance if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?
UK suffers record economic slump
The ONS said the contraction in 2020 was more than twice as much as the previous largest annual fall on record.
Real gross domestic product (GDP) increased by 1.2 per cent in December 2020, following a revised 2.3 per cent decline in November, when there were more extensive restrictions to activity.
The pre-Christmnas growth means the UK economy looks set to avoid what could have been its first double-dip recession since the 1970s. During December, a period of eased restrictions early in the month was followed by tighter restrictions to activity across all four nations of the UK later in the month.
December GDP is 6.3 per cent below the levels seen in February 2020; this compares with 7.4 per cent below pre-pandemic levels in November 2020.
Ed Monk, associate director of personal investing at Fidelity International, said: “The threat of a double-dip has been avoided thanks to a rebound in food and accommodation services after the second lockdown of 2020 was lifted early in December. 2021 may still begin with falling growth following the imposition of new restrictions since Christmas, but it appears the 1 per cent rise in the fourth quarter of 2020 will be large enough that we won’t now see a return to recession.
“With no end date planned for the current restrictions, the road ahead still looks bumpy and the 9.9 per cent fall in GDP last year was the worst on record. However, markets seem willing to look through this and have been boosted as of late by vaccine optimism. Investors and policymakers alike will be hoping that the speed of the vaccine rollout will continue to inject some health back into the UK economy. The prime minister’s speech on 22nd February will be hotly anticipated for a clearer picture of the path out of lockdown and what this might mean for Britain’s economic outlook.”
Adrian Lowcock, head of personal investing at UK investment platform Willis Owe, said: “The headline rate is high, but this is not surprising given how much disruption we saw it 2020. What is crucial is what comes next, and we expect activity and pent-up demand to help the UK economy bounce back as restrictions are eased.
“Businesses have already adapted to this new way of living, and with the additional stimulus and support from the government we could see resurgent growth this later year and in 2022. For investors, GDP numbers do not lead the stock market, so there is no call to panic and change long-term investment plans. Indeed, there are still plenty of opportunities for investors in this environment.”
Evolution seconds range for Covid-hit borrowers allows 140 per cent LTV
The lender said it was addressing a need in the market and would allow customers with missed payments and other recent credit issues to apply.
Recent missed mortgage payments are accepted on the full range with additional householder income considered and self-employed customers accepted.
Loan to values (LTVs) up to 140 per cent are being accepted with no previous mortgage history required.
Rates start at nine per cent with no consent required on loans up to and including £50,000.
Evolution said its range offers brokers wider scope to serve clients who have missed mortgage payments during 2020, seen a change in employment status or have had their credit score adversely impacted since their pre-Covid mortgage application.
According to data from Knowledge Bank, advisers have been increasingly seeking second charge options for borrowers with financial issues such as defaults.
Operations director Kerri Pender (pictured) said: “We are pleased to bring this new range of products to the market which we believe are highly relevant for the circumstances in which many borrowers find themselves in during 2021 since the onset of the pandemic last year.
“We have listened carefully to the marketplace and it is clear that many brokers demand innovative and more flexible lending criteria to assist clients raising finance through a second charge product.
“We approved more than 5,000 second charge loans last year and we predict we will see an increase in approvals this year.”
Pender added that she expects 2021 to be a big year for the second charge lending market and that the lender had further developments planned.
Mortgage lenders pledge no more repossessions until April
They also called on government to reduce the time that borrowers must wait for a Support for Mortgage Interest loan from the current 39 weeks to 13 weeks.
In a joint statement, UK Finance and the Building Societies Association (BSA) supported the regulator’s approach which will mean the measures have been in place for a full year.
The extension would still apply to both residential and buy-to-let mortgages and follows the extension of the moratorium on private tenant evictions in England until 21 February 2021.
Wales and Scotland have banned rental evictions until 31 March 2021.
“The extension will help provide reassurance to both residential and buy-to-let borrowers that they will not have their homes repossessed at this difficult time,” the trade bodies said.
“Under the extension, members of UK Finance and the Building Societies Association will agree not to seek, or enforce, a warrant for possession before 1 April 2021, unless there are exceptional circumstances such as a customer requesting proceedings to continue or when the property is in vacant measures.”
Lenders will contact customers already in arrears before Covid-19 and who continue to be unable to make payments to work towards resolving their case.
The statement noted this could include customers choosing to go ahead with possessions.
“It will always be in the long-term interest of customers who are able to do so to resume making payments, but for anyone who is still struggling, ongoing support will be available,” the lenders added.
UK Finance managing director of personal finance Eric Leenders said the industry was committed to providing ongoing support to those facing financial difficulty as a result of the pandemic.
“The industry is fully supportive of a moratorium on possessions remaining in place until 1 April 2021 to ensure customers do not lose their home at this difficult time,” he said.
“This is part of a package of support provided by lenders for those who need it, including payment deferrals and tailored assistance.
“It is vital that customers who are concerned about their finances go online or contact their lender to understand what options and support are available to them.”
BSA head of mortgage and housing policy Paul Broadhead added: “Mortgage lenders recognise the unique circumstances which are affecting some borrowers during the pandemic, a situation which can only be exacerbated by the current lockdown and the need for some businesses to temporarily close.”
Debt advice needed
Debt support charity Step Change also welcomed the further extension on property repossessions but called for the regulator to strengthen the requirement on firms to refer people to holistic debt advice services.
Step Change head of policy Peter Tutton said: “We called last week for mortgage repossessions to be halted until after the pandemic lockdown has ended, so we’re pleased to see today’s proposal from the FCA to implement this until April.
“However, we’re concerned about the potential impact of the FCA’s proposal to allow repossession of goods and vehicles in some circumstances after 31 January – customers affected tend to be more vulnerable and some creditors have historically pursued repossession prematurely, which may not square entirely with the FCA urging firms to treat this as a last resort.
“It’s vital that the FCA not only sets out strong protections, but also monitors the response of creditors and uses its supervision powers to enforce the guidance. For people experiencing debt during the pandemic, the consequences may create real and ongoing hardship even after the public health crisis ends.”
FCA to extend property repossessions ban until April
The regulator said this takes account of the worsening coronavirus situation and the government’s tighter coronavirus-related restrictions, which mean consumers could experience significant harm if forced to move home as a result of repossession.
The regulator recognised there were also government bans on evictions in some nations, which could prevent firms from enforcing home repossessions.
The FCA is inviting comments on the proposals until 10am on 18 January with a view to updating the guidance before the current iteration expires on 31 January.
“We want to act quickly to continue to protect consumers in these difficult times,” the FCA said.
“We consider that the delay involved in publishing a formal consultation accompanied by a cost benefit analysis would be prejudicial to consumers’ interests. We are therefore not doing so.”
The current guidance on mortgage repossessions, last updated in November, means firms should not enforce repossessions before 31 January 2021 except in exceptional circumstances, such as a customer requesting that proceedings continue.
The November guidance also tackled how firms should handle borrowers taking payment deferrals or coming into arrears or under financial pressure during the pandemic.
Furthermore, it urged second charge lenders to consider cutting interest rates and potentially even remove interest altogether for borrowers requesting payment holidays.
And it set out how lenders should report consumer borrowing and deferrals to credit reference agencies, emphasising that firms should ensure they are clear about the credit file implications of any forms of support they offer customers, including rescheduling or refinancing of accounts.
Mortgage market firms and other lending hardest hit by coronavirus – FCA
Overall the Financial Conduct Authority (FCA) believes 4,000 of the 23,000 financial services firms it regulates are at a greater risk of failure due to the pandemic.
This risk appears to be most significant among those involved in retail lending, including mortgage brokers and non-bank lenders, but the FCA did not give a breakdown of the 4,000 figure.
However, the regulator’s research asked about the impact in May and June with the fallout from the first lockdown at its most acute – since then the mortgage market in particular has boomed.
Retail lending markets hardest hit
The FCA found the greatest decrease in profitable firms between February and May/June was in the retail lending sector and more than half of firms added that their business model had been hit.
This includes credit reference agencies, debt purchasers, collectors and administrators, debt advice firms, motor finance providers and peer to peer lending platforms, along with mortgage advisers and non-bank lenders.
Of the 4,976 respondents from this sector, 1,495 or 30 per cent said they were unprofitable after the coronavirus started, down from 1,014 or 20 per cent who said they were unprofitable before it hit.
Average profits also fell sharply producing the steepest fall in cash terms of the whole industry.
The median profit for retail lending firms fell by almost half from £9,000 to £5,021 during the first wave of the pandemic.
Reflecting this, the most negative outlook was in retail lending where 2,891 respondents, or 58 per cent, said their business model had been damaged.
This was the highest in terms of proportion and actual numbers across all sectors of the industry.
And two thirds of retail lending firms were expecting a fall in income as a result of the pandemic – matched only by those involved in retail investments.
Illustrating the severity of this, 15 per cent of firms, a total of 421, said they expected their income to fall by more than half – by far the largest number in the industry.
Perhaps unsurprisingly, firms in the sector were also the most likely to take advantage of government support.
Half of retail lending firms had furloughed staff and 36 per cent had received a government backed loan at the time of response.
One note of encouragement, there was an increase in liquidity for the sector with the median firm reporting its liquidity at £73,466 – up from £47,000 pre-pandemic.
Low resilience and heightened risk
The results come from surveys sent to solo-regulated firms to inform the FCA of the impact of coronavirus on firms’ financial resilience, with approximately 19,000 responses received.
It did not cover the 1,500 largest firms, such as the main high street banks, in the financial sector which are regulated by the Bank of England’s Prudential Regulation Authority.
FCA executive director of consumers and competition Sheldon Mills, acknowledged the market was in an unprecedented and rapidly evolving situation.
“A market downturn driven by the pandemic risks significant numbers of firms failing,” he said.
“At the end of October we’ve identified there are 4,000 financial services firms with low financial resilience and at heightened risk of failure, though many will be able to bolster their resilience as and when economic conditions improve.
“These are predominantly small and medium sized firms and approximately 30 per cent have the potential to cause harm in failure.”
Mills noted that the regulator’s role was not to prevent firms failing but to ensure it happened in an orderly way.
“By getting early visibility of potential financial distress in firms we can intervene faster so that risks are managed and consumers are adequately protected,” he added.
Santander warns valuations may be slower in lockdown
However, it has warned that these may take longer than usual and this could have a knock-on effect on mortgage offers.
In a message on its broker portal, the lender said: “Further to the national lockdown announcement by the UK government on Monday 4 January, our valuation partners have confirmed that they continue to provide valuation services at this time in England, Northern Ireland, Scotland and Wales.
“However, please be aware that valuations could take longer than usual which could impact the time to mortgage offer.
“Thank you once again for your continued support and patience during this time.”
Helen Harrison, head of intermediary distribution at Santander, said: “Working with our valuation team, we’re pleased to be able to continue to progress mortgage applications during the latest lockdown.
“While valuations may take longer, for example due to problems entering a property where an occupant is self-isolating, we are working hard to ensure as many customers as possible can continue as quickly as possible on their homeownership journey.”
Surveyors confident of continuing
With the housing market allowed to continue operating during the latest set of restrictions it is hoped services will be largely unaffected, especially as the vast wave of homebuyers are aiming to take advantage of the stamp duty holiday which ends on 31 March continues.
Countrywide Surveying Services, one of the largest surveyors in the UK, confirmed yesterday that its operations would not be affected.
SDL Surveying today confirmed its surveyors were still able to value and survey homes.
It has also toughened up protocols for in-depth assessments such as homebuyer reports by requiring all residents to be outside the property during the internal assessment.
The firm is also urging its surveyors to contact all forthcoming appointments, to highlight the changes and check whether occupants have had any changes in their circumstances, for example, a renewed need to shield.
Last month lender MT Finance highlighted that it was starting to see surveyors and solicitors withdrawing from meetings or visits as the latest coronavirus wave took hold.