Brokers urged ‘plan ahead’ as Accord rewards staff with Christmas Eve off
It’s the second straight year in which the lender has done this, which it said was in recognition of their work throughout the pandemic. As a result staff will have a five-day break from the office, returning on Wednesday 29 December.
Accord said it was therefore important for brokers to plan ahead if they were likely to need to contact the lender, as call centres will be closed during these dates.
Jeremy Duncombe (pictured), managing director at Accord Mortgages, said that the “excellent team” had gone above and beyond to support brokers and borrowers during the pandemic.
He added: “By giving this advance notice, we hope this reduces any impact on brokers and helps encourage them to conduct any urgent business with us before the 23rd. I’m sure they understand why we have made this decision to recognise the efforts from our team. We wish everyone across the intermediary market a fantastic festive break.”
Younger borrowers keen to talk protection since Covid – AMI report
A report from the Association of Mortgage Intermediaries (AMI) called Protection: Moving Forward confirmed 40 per cent of 18-34s say they would consider income protection as a result of Covid-19 where they might not have before – twice as many as those in the 35 to 54 age bracket and ten times higher than the over 55s.
The poll of 5,000 consumers and 250 mortgage brokers supported by Legal and General and Royal London also showed 18 to 34 year olds think income protection is just as important as buildings insurance.
The research also showed over half of protection discussions have increased and one in four of those advisers are referring to a protection specialist, up from one in seven last year. Of those asked, 99 per cent of advisers are now raising protection with their clients when discussing mortgages and a quarter are passing them onto protection specialists.
The question of cash
Contrary to popular belief, cost isn’t the main reason consumers don’t buy protection from their broker – most don’t think they need it. However, where 99 per cent of advisers say they raise protection, up to two thirds of clients don’t remember discussing it.
Julie Scott, chief commercial officer at Royal London, said: “It’s motivating to see that nearly two thirds of the mortgage advisers surveyed have noticed an increase in their protection business since the start of the pandemic.
“This has created awareness of vulnerability in society, particularly in relation to health. Consumers now understand that a life shock can happen out of the blue.”
On the optimal time to raise the protection discussion when in front of the client, 30 per cent of advisers raise it at a specific point during the interview where 70 per cent don’t formalise the process.
Emma Walker, chief marketing officer from Lifesearch, said: “It is interesting that brokers choose to raise protection at different points in the advice process and that there is no obvious method that is more successful. Perhaps the most important issue is ‘what’ is said, rather than ‘when’ it is said.”
It appears that context for the conversation also remains key.
Stacy Reeve, senior policy adviser, AMI said: “Our research shows that those advising on a mortgage are in the ideal position to raise protection – for consumers that bought protection cover, a new house purchase was the top trigger for all protection products. So why have such a small percentage of consumers purchased protection insurance via their mortgage adviser given their role in facilitating the house purchase?”
Government support cushions mortgage arrears in Q3
According to the UK Finance arrears and possessions figures, the number of homeowner mortgages in arrears dropped by three per cent to 74,210 while buy-to-let mortgages fell by six per cent to 5,670.
Within the homeowner arrears, 25,110 were in early arrears of 2.5 to five per cent of the outstanding balance. This was a decline of five per cent on the previous quarter and 10 per cent down year-on-year.
UK Finance said early arrears were lower than pre-pandemic levels and although Covid-specific support schemes had ended, continued forbearance provided by lenders would moderate but not prevent a rise.
Also within the total was 27,980 homeowner mortgages which were in significant arrears of 10 per cent or more of the outstanding balance. Compared to Q2, this was up by 70 cases.
UK Finance said borrowers who were already significantly behind on payments before the pandemic would have made use of the support available to catch up, helping to keep the overall figure low.
There were 410 homeowner mortgaged properties and 320 buy-to-let mortgaged properties taken into possession in Q3.
Although this represented quarterly increases of 95 per cent and 39 per cent respectively, UK Finance noted this was only a surge because of the moratorium put on possessions between March 2020 and April this year.
It said the number of possessions would gradually increase as the courts continue to work through the backlog of cases.
Eric Leenders, managing director of personal finance at UK Finance, said: “Mortgage arrears continued to fall to near historic lows during the third quarter of the year, with the furlough scheme and the previous mortgage payment deferral scheme supporting people and even enabling some to pay down existing arrears.
“Following the end of the year-long moratorium on possessions in April 2021, there were a small number of possessions in Q3, however these reflected cases where people were already in financial difficulty before the pandemic.”
He added: “Possession is only ever a last resort after tailored support is exhausted and we expect to see a gradual increase in cases as the courts continue to process those which had been put on hold.”
UK job vacancies hit another record high
Figures from the Office for National Statistics (ONS) show there were 1,102,000 vacancies between July and September, 318,000 more than pre-pandemic levels in January to March 2020.
Vacancies increased across most sectors, but the largest increase was in motor vehicle and motorcycle repair, where openings were up by 35,100.
Accommodation and food service and manufacturing also saw large increases in vacancy numbers.
Redundancies have decreased on the quarter to 3.6 per thousand in June to August, down 0.2 per thousand, which is similar to pre-pandemic levels.
Darren Morgan, director of economic statistics at the ONS, said: “Vacancies reached a new one-month record in September, at nearly 1.2m, with our latest estimates suggesting that all industries have at least as many jobs on offer now as before the onset of Covid 19.”
Meanwhile, the number of employees in September was back to pre-Covid levels, up 207,000 to a record 29.2m.
The employment rate for June to August was 75.3 per cent, down 1.3 percentage points from pre-pandemic levels, but up 0.5 percentage points from the previous quarter, with the bulk of the growth coming from part-time workers.
The unemployment rate was 4.5 per cent, up 0.5 percentage points since pre-pandemic levels, but down 0.4 percentage points from the previous quarter.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “While it seems like we’re in the clear, we’re still not out of the woods just yet. We don’t yet know how many firms plan to lay off fewer than 20 people.
“Given that businesses with fewer than 50 staff employ almost half of UK workers, that’s a massive unknown. It‘s also still relatively early days for companies bringing people back from furlough.”
House price growth in tourist hotspots pricing out young and low paid ‒ ONS
It noted that house prices in some rural and coastal areas rocketed by three times the national rate in the year to July. For example, Conwy in North Wales has seen prices jump by 25 per cent over the past year, while North Devon prices have risen 22.5 per cent. House prices in Richmondshire in the Yorkshire Dales have grown by 21.4 per cent over the same period.
By contrast, the seven areas which have seen house prices fall were all found within London.
The ONS said that there was some evidence of people house-hunting in rural areas, ahead of cities, because of a change in their circumstances brought on by the pandemic, including the ability to work remotely. However, it added that there had already been a trend of people increasingly moving from urban to rural areas in recent years.
The report also highlighted that people who work in these tourist hotspots tend to earn less on average than the people who live there. It cited the example of the Cotswolds, where residents earn an average of 28.7 per cent more than those who are employed in the area.
The ONS added that in tourist hotspots, workers tend to earn less than residents because of the types of jobs in these areas, which are often centred around hospitality. Not only do hospitality workers tend to earn less on average, but it is a sector that was hit particularly hard by the pandemic, with hospitality workers the most likely to be furloughed.
Locals can’t afford to stay
Sarah Coles, personal finance analyst at Hargreaves Lansdown, noted that this situation isn’t just difficult for families who can no longer afford to live in their hometown, but for the businesses whose employees are forced to leave town.
She added: “The ONS found this time last year that 29 per cent of people wanted to work from home at least part of the time in future, and 12 per cent of them considered relocating as a result.
“We can’t be sure all this enthusiasm for homeworking has endured, as some people have become increasingly fed up after staring at the same four walls for another year, but there are still significant numbers ready for a change. It means buyers are flocking to the seaside and the countryside, and locals looking for a home of their own increasingly can’t afford to stay.”
PM Boris Johnson announces 1.25% national insurance hike to fund social care
Boris Johnson said National Insurance rates will go up by 1.25 per cent from April 2022 to help fund “the biggest catch-up programme in NHS history”.
He said the new levy would raise almost £36bn over the next three years, with money “going directly to health and social care” across the whole UK.
From 2023, the tax will be applied to earned income, appearing on employees’ pay slips.
A 1.25 per cent rise in dividend tax will also be introduced.
Announcing the measures in the House of Commons, the prime minister said that from October 2023 lifetime care costs will be capped at £86,000 in England.
He also said no-one with assets of less than £20,000 will have to make any contribution from their savings or housing wealth – up from £14,000.
People with assets between £20,000 and £100,000 will be eligible for some means-tested support.
Scotland and Wales are devolved and work with a £50,000 housing wealth threshold, not £20,000 as stated in England.
Johnson said: “Today we are beginning the biggest catch-up programme in NHS history, tackling the Covid backlogs by increasing hospital capacity to 110 per cent, and enabling nine million more appointments, scans and operations.
“As a result, while waiting lists will get worse before they get better, the NHS will aim to be treating around 30 per cent more elective patients by 2024/25 than before Covid.
“And we will also fix the long-term problems of health and social care that have been so cruelly exposed by Covid.”
Johnson admitted that the increase to national insurance breaks a Tory manifesto pledge.
He said: “I accept this breaks a manifesto commitment, which is not something I do lightly.
“But a global pandemic was in no-one’s manifesto. I think the people in this country understand that in their bones and they can see the enormous debts this Government and the Treasury has taken.
“After all the extraordinary actions that have been taken to protect lives and livelihoods over the last eighteen months, this is the right, the reasonable and fair approach, enabling our amazing NHS to come back strongly from the crisis, tackling the Covid backlogs, funding our nurses, making sure people get the care and treatment they need, in the right place at the right time, and ending a chronic and unfair anxiety for millions of people and their families up and down this country.”
Matthew Connell, director of policy and public affairs at the Personal Finance Society, said: “This is far from a perfect care funding solution for all as the new cap on the cost of social care only reduces the risk that some people will have to sell their homes to pay for care.
“Today’s announcement focuses on funding but we also need to know what this cash will provide as there are issues with the availability and accessibility of different types of care.”
New build sales lowest in a decade due to Covid-19 and EWS1 form delays
Research from the Warwick Estates, which analyses data from the government’s UK house price index, showed that in 2010 new build homes accounted for 9.6 per cent of sales, rising to 13 per cent in 2019.
However, in 2020 only 8.8 per cent of sales were new builds, a fall of around four per cent on the previous year, which is the biggest annual decrease in a decade.
All regions bar Northern Ireland saw falls in new build sales, with the largest taking place in North East, which fell by 6.3 per cent.
This was followed by East England with a 5.2 per cent decrease and North West with a five per cent reduction.
Northern Ireland new build sales rose 0.5 per cent in 2020 to 18.3 per cent.
Warwick Estates partially attributed the fall in new build sales to the Covid-19 pandemic, which limited construction and delayed projects.
The firm said the introduction of the EWS1 form in 2019, which aims to ensure external cladding on high rise buildings is safe, had created backlogs in sales as there were few professionals who could complete inspections.
Consequently, home purchases could not be completed without the certification leaving many borrowers in the lurch and reducing the number of new build transactions.
Warwick Estates’ chief operating officer Bethan Griffiths said: “A huge level of buyer demand spurred by the stamp duty holiday has helped revive buyer demand, but such unprecedented levels of market activity have seen resources stretched and, while homes are going under offer at an alarming rate, there have been substantial delays during the back end of the transaction process.”
She added that the EWS1 forms has been “extremely difficult” to get, with delays of six months of more in some cases.
Griffiths said: “Despite attempts to remedy the situation by removing the requirement on buildings of 18 metres or less, we’re yet to see any real headway being made and the issue continues to prove problematic for those operating within the industry.”
Kensington offers self-employed tolerance in case affordability assessment
The product will assess the affordability of those who have seen their earnings fall by up to a quarter based on the average of the last two years of income. A minimum of three years’ trading history will be required.
The product is available up to 85 per cent loan to value (LTV) with rates starting at 3.28 per cent for a five-year fixed at 75 per cent LTV and a £1,999 fee.
Rates for Kensington’s shared ownership range start from 4.14 per cent on a two-year fixed mortgage and 4.54 for the five-year fixed equivalent.
The maximum loan size is £500,000 which will cover up to 95 per cent of the borrower’s share in the property.
It has no product fees and offers free valuations.
The shared ownership deal will be available on both new build and secondhand properties. Gifted deposits will also be considered.
Craig McKinlay (pictured), new business director at Kensington Mortgages, said: “Over the last year, many self-employed borrowers have found themselves demoralised from applying for a mortgage, either through past rejections or bearing the financial brunt of the pandemic.
“However, we’re not closing our doors on the self-employed. We’re keeping them wide open. Kensington will lend a hand to some of those hit hardest by the pandemic through the range.”
He added: “The shared ownership range will also help those who want their own space to own it. At a time when many have struggled, both products will help make homeownership a reality for those who may otherwise have felt it was out of reach after the pandemic.”
Lenders need to have ‘sense of urgency’ to protect customers as payment deferrals end
The scheme was introduced in March last year and allowed borrowers to defer mortgage payments by up to six months.
This was due to end in October last year, but new rules from the Financial Conduct Authority said applications for new mortgage payment deferrals would close on 31 March with all payment deferrals ending on 31 July.
According to the latest figures from UK Finance, around 2.9m people took a mortgage payment holiday whilst the scheme was active, and the majority have now returned to making full payments.
This is echoed by the most recent figures from lenders, who are currently reporting their half-year results.
However, as payment deferrals wind up, there are concerns that the removal of this support could lead some consumers to fall into arrears if lenders and advisors do not act quickly.
Smartr365 chief executive officer Conor Murphy said: “It was vital that lenders not only offered mortgage payment holidays to those in need but also did it quickly, given the severity of the financial situations that many found themselves in as a result of the global crisis.
“However, as this temporary lifeline comes to an end, advisers and lenders must now act with a sense of urgency to ensure homeowners do not fall from the safety of the holiday into arrears.”
He continued that the ending of the holiday should being a “renewed focus to vulnerable customers”, especially when it comes to how they are identified and supported.
“A strong CRM system, that allows you to communicate with clients virtually or in-person and keep track of their cases will be key to this. Finding ways to then help those who have been identified as needing additional support is likely to be complex and time-consuming,” he added.
Masthaven’s chief lending officer David Kennedy echoed the need for customers to be supported as schemes were rolled back.
He said: “As these pandemic measures and support schemes are wound down, it’s vitally important that customers aren’t abandoned. Some borrowers may be embarrassed to ask for help or unsure about where to turn.
“Lenders need to be proactive about identifying these customers early and reaching out to them to meet these challenges head on and avoid storing up problems further down the line.”
Kennedy added there could be a surge in customers needing specialist support and more “tailored lending”, which could be a boon for the specialist sector.
“Specialist lenders have coped well with the challenges of the pandemic so far and they have the right people and tools to take a pragmatic and personalised approach to supporting their customers through this next phase. There are certainly big challenges still to come and no one can afford to bury their head in the sand.”
A UK Finance spokesperson said that if customers were still struggling after payment deferrals end, they should contact their lender to discuss and agree on further support, which may include more tailored assistance.
This could include extending the length of the mortgage term, changing the type of mortgage, deferring the payment or interest or sums due or capitalising the interest accrued.
Updated figures from lenders on mortgage payment deferrals
The latest figures from NatWest showed there were around 500 borrowers still on mortgage payment holidays, which is down from 12,000 in the same period last year.
Coventry Building Society noted that up until 30 June this year there were 400 borrowers on a Covid-19 related mortgage payment holiday, down from 34,000 the same time last year. It added that around 98 per cent of affected customers had returned to full mortgage payments.
Lloyds has granted 491,000 payment holidays. Of these 460,000 are being repaid, 2,000 have been extended and 29,000 have missed payments.
Santander supported 256,00 customers with deferrals, but around 96 per cent were now up to date after their payment holiday. It noted that there was a value of £136m in outstanding payment holidays.
Yorkshire Building Society said it gave 40,424 payment deferrals linked to the pandemic, of which 99.5 per cent have resumed repayments.
The Co-operative Bank provided 175,000 mortgage customers until the scheme ended in March. Of those, 98 per cent had now returned to full payment.
Leeds Building Society has said that it supported 28,400 mortgages via the scheme.
Pandemic effects linger in criteria searches as lockdown lifts – Firth
The UK finally appears to be heading towards some level of normality as lockdown restrictions are eased. The mortgage market is also beginning to resemble its former self, if not in terms of volume of clients, then with regards to the criteria brokers are searching for.
Criteria have shifted at an incredibly rapid pace since lockdown first hit.
Knowledge Bank recorded an unprecedented 52,000 changes, and 1.35 million searches, in 2020, with lenders and brokers adapting to the extraordinary circumstances.
As criteria changed, the phrase “new normal” became a cliché as we discussed the ways the pandemic would impact the future.
Now that we are starting to see light at the end of the tunnel, what can criteria trends tell us about the mortgage market’s new normal?
Income multiples and soft DIPs
May was the first month since March 2021 to feature no Covid-related terms in the five most frequently searched criteria in the residential market.
“Furloughed workers” finally dropped out of the five most-searched terms after six-months of consistent interest from brokers.
While we may be through the worst of the pandemic, the lockdowns have certainly left some scars. There are still signs of clients struggling financially with brokers searching for “defaults – registered in the last three-years” frequently enough that the term was the fifth-most searched in May on Knowledge Bank.
Sadly, defaults are likely to continue to form a significant part of the residential market.
Even as we move away from lockdowns and industries fully reopen, clients who have been unable to pay bills will have these on their records for the next few years.
The competition for homes, which has driven rapid increases in property-prices, is perhaps also driving the use of the term “soft-footprint at decision in principle (DIP) stage”.
Brokers may be applying to multiple lenders due to the urgency that clients had to beat the stamp duty deadline. Due to the fierce competition for homes, many estate agents will not even allow a viewing without a decision in principle, so brokers are under pressure to ensure clients get one in place.
The use of soft-footprint searches could be set to continue. With brokers and clients looking for lenders who offer an application process that does not impact future credit scores, more and more lenders may look to offer this as standard in the coming months.
“Income multiple for affordability assessment” is another term that may be popular due to the pandemic. Motivated by lockdowns and sparked into life by the stamp duty holiday, house prices have risen over 10 per cent in the past year, according to Nationwide.
Despite savings increasing by £200bn since March 2020, according to the Bank of England, the spike in prices is causing many clients to stretch their affordability to get the home they want.
As the average wage is unlikely to spike to the same extent as house prices in the coming months and years, affordability will continue to be a high priority for clients.
The pandemic is still impacting the housing market to a degree, and we are not yet quite fully out of the tunnel, but a picture of the future is beginning to come into focus.
The vast torrent of clients rushing to beat the stamp duty deadline has begun to slow to a more recognisable level as the tax returns in stages.
Product ranges are returning to pre-pandemic levels, and with industries re-opening, a more settled future is on the horizon.
The mortgage market will certainly still retain some indirect indications of the pandemics impact, with some still under financial strain, but the outlook is somewhat familiar.