Vote now: How will service fare over summer as the lockdown unwinds? – poll
As many take long overdue holidays after a frenzied H1 and energy levels naturally dip, can the mortgage industry sustain the service levels it has managed into H2?
Vote now on Mortgage Solutions’ latest poll to share your predictions for the coming weeks.
Will sun and an excess of delayed fun with family and friends bring a summer of service difficulties?
Will long overdue fun with family and friends bring a tricky summer for service?
Mortgage complaints surge by more than half to 11,835 – The Ombudsman
The latest annual data from FOS showed that 10,510 of new complaints came from residential mortgages. The top three complaint categories in the sector were first charge repayments, first charge interest-only with no repayment vehicle and second charge repayment.
After residential mortgages, the highest number of new complaints were seen by non-residential mortgages at 807, equity release at 498 and home purchase plans with 20.
The FOS said complaints were made about contract terms and standard variable rates, as well as rate reductions not passed on when the Bank of England base rate fell.
It also noted complaints about payment deferrals, including the guidance given and consumers not understanding the implications of such measures.
Further, complaints emanated from Covid-19-related issues in processing mortgage applications, as well as changes to lending criteria and appetite meaning applications may have been declined.
The data also showed that enquiries to FOS about mortgages increased over the past year, growing by 12 per cent to 14,573 over 2020 and 2021.
Residential mortgage enquiries grew slightly from 12,862 to 13,034, whilst home purchase plan enquiries fell from 35 to 30.
The FOS also introduced new categories for more general enquiries in non-residential mortgages and equity release, which came to 916 and 588 respectively.
The overall uphold rate for complaints in mortgages was 21 per cent. Residential mortgages saw an overall uphold rate of 23 per cent, which is a decrease of two per cent from last year.
Nausicaa Delfas, interim chief executive and chief ombudsman’s at FOS, said: “The sharp increase in complaints about issues other than PPI is a reminder that it has rarely been more important for financial businesses to support their customers when things go wrong. As people continue to deal with the impact of Covid-19 on their lives and finances, they know they can come to our service if they’re not happy with how a financial business has treated them.”
An FOS spokesperson confirmed that it did not publish specific figures on complaints against brokers.
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.”
Post-pandemic mortgage affordability fears likely to penalise worse off, says L&G
Research from Legal and General Mortgage Club showed UK borrowers who have seen their income fall due to the Covid-19 crisis could soon pay thousands of pounds more in monthly repayments with one in three borrowers fearful of remortgaging and exposing their finances to affordability checks.
This could impact over 700,000 borrowers who will reach the end of their two and five-year residential fixed-rate mortgages in 2021.
More than half of borrowers who have seen their income reduced as a result of the crisis are concerned that lenders will now be scrutinising their finances in more depth compared to pre-Covid levels.
Half are concerned their decision to take a payment ‘holiday’ will affect their future mortgage options, and two thirds believe it will be harder to get a mortgage when furloughed.
The research showed moving onto a lender’s SVR of 4.1 per cent could increase annual mortgage repayments by more than £2,500 when compared to borrowers on the average two-year fixed rate at 2.65 per cent on a 90 per cent loan to value product.
Meanwhile, 52 per cent of those who plan to move deals say they are likely to stick with their current lender, with over a third of those saying this is the easiest way to secure a new deal.
Kevin Roberts, director of Legal & General Mortgage Club (pictured) said with many people already financially challenged finding value is more critical than ever.
“There are still thousands of great fixed rate-deals available, including furlough-friendly mortgages for those who have or continue to draw support from the government’s Job Retention Scheme.
“The UK also has a thriving specialist lending sector designed to help borrowers with complex circumstances, from the self-employed to those who might have experienced a credit blip, many of whom can only be accessed through speaking with an independent adviser who could help these borrowers to save thousands of pounds in their mortgage repayments,” he added.
How complex credit mortgage lender policies will evolve in the wake of Covid-19 – Seal
Instances such as furlough and redundancy have meant thousands, if not millions, of consumers are now in a more precarious financial position than they were before the crisis hit.
For some, keeping up with regular payments has become a struggle, with Citizens Advice reporting this has been the case for approximately six million people during the crisis.
For others, however, the pressure has been even greater; between October and December last year, 194,203 new County Court Judgements (CCJs) were issued in England and Wales, compared with 112,261 the previous quarter.
Unfortunately, instances like missed payments and CCJs are only set to become more common as the impact of the pandemic continues.
These factors are likely to create a larger cohort of consumers with more complex borrowing needs, many of whom could then find they are disenfranchised from high-street lending – even if they are perfectly eligible for a loan.
For many in this position, support from a complex credit mortgage lender could be a vital lifeline. However, as the complexities and intricacies of borrowers’ needs continue to build, lenders in the complex credit mortgage market will need to evolve and adapt accordingly – and this is an area where we will see further development and growth over the coming years.
While driving product innovation will continue to be a priority for many in this space, it is more likely that we will see lenders adapting their credit policies to suit new and evolving customer demands.
Shorter recovery periods
For lenders who are looking to capitalise on the growing long-term demand from complex credit borrowers, it will be crucial that their appetite to serve these consumers is reflected in their credit policies.
We may also see lenders in the complex credit mortgage market basing their lending decisions on shorter periods of recovery when assessing applicants.
For example, before the crisis, some lenders may have only been able to accept a borrower who could prove they had been in a financially secure position for at least 12 months, even if they had suffered from a setback before this.
However, once the pandemic subsides, this period could shorten as lenders are approached by a growing number of borrowers who have experienced more recent financial glitches but have subsequently recovered.
Post-crisis, the complex credit mortgage market will be more important than ever as thousands of borrowers emerge with more complex borrowing needs, and it will be vital that lenders, as well as advisers, are well-equipped to serve this community.
To this end, the complex credit market is sure to be one to watch in the years to come as lenders seek out new ways which will enable them to provide complex credit borrowers with the financing they need.
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.”