January 2021 |

2021 and the challenges ahead

Stuart Miller is customer director of Newcastle Building Society

The world has been through one of the worst crises of this century, and is now beginning to pick up the pieces and rebuild itself both socially and economically.

One thing is sure: we will not be going back to things as they used to be.

As COVID-19 took its economic and emotional toll on the world, the mortgage value chain of lenders, networks and brokers has faced significant challenges and grappled with market uncertainties.

Importantly, how we continue to find ways to connect with and support our borrowers, customers and intermediary partners is a critical part of that. 

The pandemic has asked new questions of us all, and is demanding new skills and approaches to support partners at the frontline, as well as those confined to their homes.

Some impacts can be more easily mitigated or controlled, but others will require us to find new and innovative solutions. From furlough earnings to mortgage deferrals, to new demands on capital and infrastructure, all lenders have had to adjust their traditional view of the world and begin to understand how they will engage with a changed landscape post-pandemic. This is true for intermediaries, too.

The pandemic is also making us reconsider how we help people own their own homes, since both generational attitudes to ownership and employment patterns for young and old have changed markedly during the last nine months.

Manual underwriting has never been more important, but other processes, which might previously have taken years to reform, have evolved overnight to support the new ways of working and living. 

The government has done much to support both the employed and self-employed population, but we know that these schemes may end in March. Less predictable is the outcome of the stamp duty holiday.

At the time of writing, it has already been reported in some of the national press that Treasury officials are poised to advise the Chancellor to extend the deadline so as to avoid the collapse of thousands of housing transactions.

Many applicants are currently progressing on the basis that no stamp duty will be payable, but already many in the industry are pointing out that transactions are taking much longer to complete, and that tens of thousands could miss the 31 March deadline as a result.

If purchases are delayed beyond this date and miss the stamp duty holiday, borrowers might find themselves having to source additional funds to cover the stamp duty costs, or instead secure a reduction in purchase price. If neither option is viable, then the impact on the market could be catastrophic, with the risk of a significant number of transactions collapsing.

It’s not hard to see the size of the problem. Extending the stamp duty holiday is crucial if we are to successfully manage the massive number of homes that are set to exchange and complete over the coming months.

As I write in early December, Bank of England figures have shown a surge in the number of mortgages approved in October, up 5.9% on the previous month to 97,532, and a massive 51% ahead of the same period last year.

If, as is typically the case, transaction numbers follow mortgage approvals by between three and five months, then some commentators are suggesting that the actual number of transactions may be closer to 120,000, making some sort of an extension sensible. 

It’s at times like this that lenders, and in particular building societies, remain steadfast in their purpose.

Societies inherently understand why they exist and who they are built to serve, from their colleagues to their customers and the communities in which they live and work.

Looking back, before the Global Financial Crisis, some parts of financial services were actually referred to as being ‘masters of the universe’. The crisis itself, and latterly the COVID-19 pandemic, have shown that is not in fact the case.

We are inextricably woven into the fabric of society, and society’s verdict will be based on how we fulfil our obligations and purpose.

Brokers are an inextricable part of that, too. In a complex market with many moving parts, good advice is more important than ever before. It’s why the mortgage market relies so much on brokers.

While we still grapple with issues we may or may not be able to fully control, it is so important that none of us lose sight of our core purpose:
to support, with your help, customers who want to buy and finance their own home.