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In an update to its draft guidance for the support of mortgage customers, the regulator said repossessions should be a last resort and borrowers were still entitled to tailored forbearance if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.
Residential transactions wind down in January – HMRC
The seasonally adjusted figure showed this was the first monthly decline since May, according to data from HMRC.
The latest transaction data indicated there were 121,640 completions in the residential market over the month, a 24.1 per cent rise on last year where activity was high due to confidence resulting from the General Election results.
HMRC acknowledged that the annual increase was likely caused by the stamp duty holiday as well as continued pent-up demand.
The non-seasonally adjusted number of transactions totalled 98,830 in January, the highest for the month since 2007 when transactions reached 114,880.
Meanwhile, both seasonal and non-seasonal figures showed transactions were at their highest point in a decade.
Slower but stable first quarter
Jonathan Hopper, CEO of Garrington Property Finders, said: “Not even a nationwide lockdown could cramp the property market’s style in January.
“Covid restrictions meant viewings slowed to a trickle, but behind closed doors, property transactions continued to go through at a prodigious rate – up nearly a quarter on last January.”
Hopper added: “Pushing against that is the large number of transactions still in the pipeline, in which buyers are racing to complete in the final weeks before stamp duty rates rise at the end of March.
“The February and March data will likely see a sprint finish of transactions, so the true test of the market’s momentum will start in April.”
Mike Scott, chief analyst at estate agency Yopa, said the firm expected the number of purchases to remain “very high” until March before dropping off and returning to normal.
“The year as a whole is likely to see a higher number of purchases than in recent years, perhaps as high as 1.3m.
“After a brief slowdown in the second quarter after the stamp duty holiday ends, we anticipate a very active housing market in the second half of this year,” he added.
Mainstream lender ‘hinting’ at 95 per cent LTV relaunch
Chris Sykes, associate director at Private Finance, did not disclose which lender was contemplating mortgages at this tier but said it was the first hint he had got from any lender, as others were comfortable where they were.
He said: “Although it’s somewhat approved by this lender, their big caveat is they don’t want to be the only one doing it as they don’t want to be seen as lending irresponsibly and they would be absolutely inundated.”
Borrowers with a five per cent deposit have had little mortgage choice since the pandemic struck nearly a year ago; the lender would have to absorb all the demand alone in an environment with record high property prices which are speculated to fall.
Sykes added: “Most [lenders] want to wait until furlough is over and to see the general long-term impact of Covid-19 on the economy.”
He also said any return would be slow and measured, like the relaunch of 80-90 per cent LTV deals.
“Although they’ve hinted at it, I think it will be a little while before we see it come back. It’s encouraging that this lender is actually happy to do it, but I think we’re still quite a way away from a return,” Sykes said.
Bottled up demand
Christopher Hall, mortgage adviser at Mortgage Guardian, had also heard hints of a lender reinstating 95 per cent LTV mortgages and also doubted a return would be immediate.
Hall said: “Demand for 95 per cent LTV mortgages has bottlenecked so when it comes back it will be like a champagne cork – the lender who comes back first will be overwhelmed.”
Sykes suspected the lender would restrict who and what properties it would lend on to minimise risk.
“Even if this lender did come back at 95 per cent LTV there wouldn’t be an avalanche of other lenders following suit straight away. It will be slow, maybe over a six-month period, before there’s a steady return like we see with 90 per cent LTVs now.”
Ramped up rates
Nik Mair, managing director of London Mortgage Solutions, said: “It would be amazing for the market but there are concerns around interest rates. 90 per cent LTVs are already at three per cent so 95 per cent LTVs would probably be priced at four per cent, which might put some people off.
“But I think it would still be good.”
Hall said with the Bank of England base rate at a record low of 0.1 per cent, lenders were making money “hand over fist” with mortgage pricing and product fees which were not always affordable for those on lower incomes or with smaller deposits.
He added: “There doesn’t seem to be much reward for the average working person.”
Primis product desk sees January enquiries spike 18 per cent
In a snapshot offering insight into the cases its Appointed Representatives (ARs) are finding hard to place, the network said its desk resolved 2,462 inbound calls; a record last month.
Between March and December 2020, the desk supported brokers with 18,746 queries in total, while throughout 2020, it resolved 23,777 queries from advisers.
The calls clearly focused on the fallout of the Coronavirus crisis as advisers also battle to beat pressure from the stamp duty land tax (SDLT) holiday deadline which ends on 31 March. The network confirmed cases involving second or holiday homes with a view to completion before the SDLT deadline were another popular enquiry.
Primis has also seen Right to Buy enquiries and income protection involving multiple and complex medical conditions in addition to complex income types.
The network said its product desk aims to address queries from advisers within four hours and is currently operating an email and call back-only service on all product sectors while Covid-19 restrictions remain in place.
Vikki Jefferies (pictured), proposition director at Primis, said: “January marked a strong start to the year for our product desk team, with a record number of queries from brokers coming in as this community looked for additional support to help them with client cases. Investing in our adviser members has continued to be a priority for us during the Covid-19 pandemic.”
On furloughed borrowers, Jefferies said lender appetite for these borrowers completely varies across the market.
“Lenders remain cautious about what will happen to sectors such as hospitality and retail from April onwards. Their main aim is to see what will happen to the market once government support schemes such as furlough end.”
She added that specialist lenders have a much better understanding of schemes like the Self-Employment Income Support Scheme (SEISS).
“Compared to where we were in the early autumn, we are seeing more considered decisions from underwriters at specialist lenders when assessing self-employed borrowers. However, the most recent development has been that many specialist lenders are unable to support borrowers who have taken an SEISS grant as recently as January.”
On the day the scheme was due to end, the government announced plans to extend the furlough scheme through to April this year, with an estimated 9.9m people registered in December and claiming 80 per cent of their income up to the cap of £2,500. The government has so far spent £46.5bn to December 2020 on furloughing workers in a bid to protect jobs.
According to Office of National Statistic (ONS) figures, UK unemployment figures were at five per cent to November-end, but are projected to rise to 7.5 per cent or 2.6m by mid-2021. The Bank of England estimates unemployment could rise to 10 per cent this year.
With hotels, restaurants, shops and entertainment industries the worst hit so far during the pandemic, 395,000 people were made redundant in the three months to November.
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?
Accord temporarily pulls 75 and 80 per cent LTVs
Staff at its Lynch Wood site, where the majority of its underwriters are based, have been asked to self isolate after some employees tested positive for the virus. As the employees stay home and the office undergoes a deep clean, the lender has anticipated it will face capacity issues due to the reduced number of underwriters.
The products will be removed today at 8pm and any full mortgage applications for existing products must be submitted before then.
Agreements in principle (AIP) submitted by the deadline which have been referred will be honoured on the selected mortgages even if they have been accepted after the withdrawal.
Jeremy Duncombe (pictured), Accord’s managing director, said: “Our priority has always been the health and wellbeing of our colleagues, so we have taken the decision to withdraw products at 75 per cent and 80 per cent LTV to ensure service levels can be managed with our reduced capacity.
“Whilst we are doing everything we can to minimise the impact to service, in these exceptional circumstances with less underwriters available, there are likely to be some delays, so we advise brokers to check the current turnaround times on our website in order to manage client expectations.
“We expect this to be a very temporary pause on lending at these tiers and are still accepting applications on all other products within our range,” he added.
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.
NatWest and Santander reinstate pre-pandemic porting and offer timescales
Santander has announced any mortgage applications submitted from 1 January will no longer be granted a two month extension to enable completion.
In March last year, lenders agreed to extend mortgage offers by up to three months to allow customers time to complete transactions amid the closure of the property market and subsequent delays along the chain.
Now, applications submitted to the bank after 1 January will be processed in line with Santander’s existing offer validity of three months.
No extra action needs to be taken for applications which have already been submitted or received an offer, but Santander said brokers should inform them if there are any material changes.
The bank also said reversion back to three-month offers would still allow new applicants to meet the stamp duty holiday deadline.
Helen Harrison, head of intermediary distribution at Santander said: “We know that with the current volume of homebuyers in the market, and the challenges presented by Covid-19, some customers may be finding the buying process is taking longer than usual.
“For customers with mortgage offers that were due to expire soon, our automatic two month extension will provide peace of mind allowing them to focus on progressing their purchase.”
NatWest is reverting the window to refund a mortgage porting to four months, in line with conditions before the Covid-19 pandemic.
Applications fully submitted before 31 January will still be entitled to a porting refund window of six months, while applications made from 1 February onwards will go back to the shorter original timeframe.
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.”