It’s been a fortnight since the housing market reopened – another two weeks that has passed by in a flash. Advisers are coming back off furlough, remortgages and purchase business are going ahead as the sector gets moving and the levels of interest and searches for products and mortgage deals are encouragingly high.
It feels like a good moment to take stock and reflect on how far we have come.
Reasons to be cheerful
Uncertainty about what lies ahead is giving way to a cautious confidence about the market. There are some promising signs. A survey released by Masthaven this week showed that 71 per cent of advisers are confident about the mortgage market’s prospects and the latest figures from Twenty7Tec are showing post-lockdown highs in purchase searches. Last week we saw lenders including Accord, Virgin and Clydesdale returning to 90 per cent LTV and my conversations with advisers across the market suggest that they are seeing positive interest from clients as well.
There are encouraging signs in the wider housing market as well. Chains are not collapsing and enquiries into the estate agents are better than expected. Data from Zoopla has showed an 88 per cent rise in demand following the reopening of the market – a figure 20 per cent higher than at the beginning of March. The crisis isn’t over, but it does feel as though the housing and mortgage markets are proving to be resilient.
It has been a buoyant two weeks for Legal & General Mortgage Club, too. Lending through the club has started to pick up with the last two weeks at circa £3bn – a lower figure than what we had in our plan pre-Covid-19, but nonetheless a positive improvement against April’s lockdown.
Our data also shows that adviser searches on behalf of a wide range of customers, from first-time buyers through to landlords, are increasing too. Searches by advisers for joint borrower/sole proprietor, shared ownership and even expats as first-time landlords are all up significantly on last month.
These are these reasons to be optimistic, but we cannot lose sight of the challenges that lie ahead.
Last week’s extension of payment holidays will ensure borrowers continue to get the relief they need in the months ahead. However, the changes will also pose challenges for non-bank lenders relying on the capital markets for funding (one in three customers of non-bank lenders have taken payment breaks, versus one in nine in the mainstream market). We will need a vibrant specialist lending market as we emerge from this crisis to support the millions of self-employed borrowers and those with adverse credit. If this sector suffers because of a lack of liquidity, these borrowers will be much poorer in their choice of mortgage and this group of customers looks set to grow even further as the economic impact of this crisis becomes clearer.
We need to satisfy the demand that is there now while some non-bank lenders are closed for business. Searches through Legal & General Mortgage Club’s SmartrCriteria tool tell us just how much demand is there for customers with defaults, for instance. This month we saw a 76 per cent rise on April in searches for products available to these customers – it was the second-highest term advisers searched for.
Advisers will also have a very important role to play in helping these borrowers to return from payment holidays – they are already searching for solutions such as interest-only. They’ll also be needed to help self-employed borrowers and other customer groups to find new mortgages. The support of lenders that are willing to lend to these borrowers will be vital. Building societies have set a trend of carving out niches in the mortgage market and lending to the underserved, so could the immediate demand from self-employed borrowers and individuals with credit blips present a new opportunity for the building society sector?
The bank holiday weekend certainly provided some respite and I was able to get out and enjoy the weather as I worked with a group of fellow cricketers to repair the artificial strip on our pitch. In our new normal of working from home and after weeks in ‘isolation’ and social distancing, it reminded me just how much I had missed even basic interaction with my mates – and it boosted my mood.
Last week was mental health awareness week and it serves as a reminder for us all to check in on our friends and colleagues. The novelty of working from home may have worn off for some, but it is an excellent time to revisit our earlier enthusiasm for checking in on our teams and making sure colleagues were adapting and had what they needed. After all, the pressures we all face from this crisis are still there – from homeschooling, to living and working in isolation. The stress and the worry about the future has not gone away and will have even intensified for some. We must not forget to think about ourselves, our friends and those we work with as well, and to be kind.
Kevin Roberts, director, Legal & General Mortgage Club