Coming out of lockdown to a new mortgage ‘norm’

By: Martese Carton, Head of Intermediary Distribution

It’s six months since the UK’s nationwide lockdown was introduced and it’s fair to say that what we used to regard as normal life has changed out of all recognition. Our hair has grown longer, our dress code has relaxed and we’ve all learned to get along better with our family units.

And of course, it’s not just home life that has been disrupted. Business and commerce have had to adapt more quickly than ever before. We are now used to working at the dining room table, kids’ heads or pets popping into the background of Zoom meetings and having a bit more flexibility over when we start, finish and re-start our activities.

Whilst there’s no getting away from the fact that the economy is currently suffering and will continue to do so for some time, there is evidence that some changes will have a direct impact on the housing market.

For instance, research published by O2 revealed that employees are now more inclined to move further away from their place of work because they no longer need to brave the daily commute, instead travelling into work only once or twice a week. The study showed that two-thirds of people now say that they would be prepared to move at least an hour’s travel time away, compared to the current 30-minute average.^[1]

This could very well lead to an upswing in properties being put on the market in traditional commuter belts as people look to move to more rural locations. Indeed, walking around my neighbourhood this week I have been struck by the number of ‘For Sale’ and ‘Sold’ boards that have appeared.

Unsurprisingly, there has been a lull in the number of new mortgage deals on offer as lenders have focused on processing the deluge of payment holiday requests they have received. Figures published by UK Finance show that one in seven mortgage holders have taken a payment holiday due to the coronavirus outbreak.

And faced with their unprecedented situation, lenders have had to innovate to be able to deliver some of the key processes such as valuations.

The emergence of contactless valuations during lockdown has enabled many low LTV sales to continue. Whether the contactless technology can be developed to accommodate higher LTV property purchases and lessen the dependence on physical valuations is one to watch.

At times of uncertainty like this, people turn to those they regard as trusted experts and advisers for guidance on what to do. Mortgage brokers certainly fall into this category and can play a key role in taking care of their customers’ current worries. Do this right and they’ll have some very loyal customers for life.

As the property market picks up steam, brokers will be faced with a new set of challenges that their customers will be facing.

There will be those that may have been furloughed, facing redundancy or be uncertain about their future employment prospects, who will need guidance on how to maintain their mortgage payments. Lenders’ criteria will change often as they tweak to accommodate the changes in circumstances and keeping abreast of those will give brokers opportunities to source deals for their customers.

And, what about homeowners’ behaviours?

If we look back to the financial crisis of 2007/8, when there was a general tightening on disposable income and a reduction in consumer confidence, many homeowners who were originally looking to move, changed their plans and instead applied for additional borrowing to carry out home improvements - whether that was to build an extension or convert a garage or loft. We might well see people opting to do similar in the coming months.

This may be accentuated if, as anticipated, workers spend more time working from home. Whilst the kitchen table or bedroom might have been a satisfactory, albeit temporary, alternative to the office, people may now look towards having a permanent office space in their homes. This could be an extension, conversion or potentially a garden office. All of these options are likely to require finance, so there are opportunities for brokers even if house moving might be slower.

Throughout this whole difficult period, the one thing that has shone through is the willingness of people to ignore previous lines of demarcation to work together to get things done. And that’s been evident in the mortgage industry, with lenders’ staff doing their best to update criteria and lending policies, BDMs going the extra couple of miles to support their brokers and brokers themselves reaching out to their customers to look after their interests.

As we emerge from lockdown and the property market springs back into life, we must retain these new relationships and ways of working so that we can become a healthier and happier sector. At Leeds Building Society, we’re here for you. Our aim is to focus on what matters to you. Our people are committed to delivering the best and by working together, we’ll make things happen.

^[1] https://news.o2.co.uk/press-release/a-flexible-future-brits-expected-to-call-time-on-office-life-after-lockdown/