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‘The phrase mortgage holiday has caused problems for borrowers’ – Star Letter 17/04/2020

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  • 17/04/2020
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‘The phrase mortgage holiday has caused problems for borrowers’ – Star Letter 17/04/2020
Each week, Mortgage Solutions and its sister title Specialist Lending Solutions run a Star Letter feature, in which we collate the top comments posted under our articles.

 

The first came from Arron Bardoe, under the article: One in nine borrowers freeze mortgage payments 

He said: “While a godsend for many, I am concerned this holiday is being abused. 

Anecdotally, I am aware many such requests are from borrowers entirely unaffected by Covid-19, but many lenders simply do not have the resources to vet the requests. 

The problem seems to have been caused by the government’s phrase mortgage holiday rather than deferment. Santander has helpfully put an indication of the cost of such a request on its system to ensure borrowers are aware of the cost,” Bardoe added. 

 

Knock-on effect on credit and cashflow 

He continued: “Thereon, with the sheer volume of requests, it is likely lenders will struggle to ensure credit records are corrected in time. Even if they do, other lenders will be able to see if borrowers have used the payment holiday as the mortgage balances will have risen on the previous month with no record of a missed payment. 

As the pandemic is unlikely to be resolved for one to two years, a prudent lender may be cautious in lending to borrowers who have had cause to use the deferment during the first lockdown. 

Lastly, let us also not forget the effect on the cashflow for banks, who will be foregoing £1bn in revenue over the next three months. 

 

Improving new-build quality 

The next article which received a response was: Govt talking to HBF on Help to Buy, stamp duty and re-opening housing market 

MCFC1894 said: “Builders were dreading the end of Help to Sell and the huge profits and bonuses that came with it.  

Its shameful they are using this crisis to hold their caps out for more taxpayers’ cash. Builders should rebate both owners and the government on leasehold houses that help to buy loans are secured on.  

Help to buy, as per the new proposals, should only be open to firsttime buyers. Developers should concentrate on improving the quality of their product. 

 

Appreciating lender efforts 

The final article to prompt an interesting reply was: ‘Brokers will not hurry to use lenders who let them down in this crisis’ – Marketwatch 

Bardoe again had something to add to the discussionI agree that brokers should remember the lenders that have let them down, but also those that have stepped up to the mark. 

It is only when we are most challenged can we truly understand the lenders that have customers and brokers at the heart of what they do. 

Broadly, the mainstream has all been good with sensible changes to criteria and an evident effort to change their practices to cope with the current situation. In turn, these have been communicated well and quickly. 

 

Ramping up processes 

Bardoe added: “Our business development managers are fielding more calls and taking on more duties with some banks reallocating broker support staff to help borrowers worried about how they will make their payments – the right call in my view. 

Automated valuation models have been fast-tracked and most lenders have maintained a system of contact on cases. I have one urgent case where Sally Hall of the Halifax was able to go above and beyond to help meet an exchange deadline of the last tax year. 

 

Looking to the future 

Bardoe continued: “Conversely, I have had two lenders create forms asking for clients to explain their contingency plans in light of Covid-19 for buy to let applications; one of these was postoffer. 

Heaven knows how most customers would be able to answer this question, but it does seem to be an effort to decline cases. Fortunately, my clients were in good financial positions, but I imagine some borrowers have now had their offer withdrawn or application declined as a result. 

Bardoe added: “To determine a long term contingency for the average borrower, one would need to know for how long it will last, but even the government has yet to decide the term of the lockdown and there is still no vaccine indicating we will have some effects for one to two years. 

Post this pandemic, will these lenders now include this as a standard question or require a contingency fund for all applications? Perhaps they should throw in a world war and zombie apocalypse? 

Notwithstanding the above, I would like to finish with my thanks to all lenders and their staff for their hard work at the moment. 

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