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May 2020 | IMLA

Kate Davies: Finding optimism in times of crisis

Kate Davies is executive director of the Intermediary Mortgage Lenders Association (IMLA)

The mortgage market has seen a monumental shake-up to normal activity in recent weeks as the impact of the coronavirus crisis has unfolded.

No one in the sector has had to contend with anything close to the scale of disruption caused by the virus in their lifetime.

Every person and every business in this and all other industries has had to adapt to a new state of ‘normal’, but it has actually been quite amazing to see how fast and positive the response to the crisis has been.

Take the working from home phenomenon as an example. Pre-crisis, how many businesses in the market could truly say that they were set up and ready for remote working? Not that many. But now the tide seems to be changing.

There has even been talk of a ‘distributed work revolution’ caused by the current upheaval, with remote working set to become the status quo for many of those companies that are embracing it during the crisis.

Many lenders and intermediaries have gone to great lengths to ensure they can continue business as usual while working from home.

Digital solutions have been widely adopted at speed. For example, many lenders have rapidly increased their use of automated valuation models (AVMs) and desktop valuations, as physical options have become more difficult to carry out.

The benefits of this change will far outlast the crisis.

The majority of lenders have not been forced to shut up shop for new business during the crisis; remortgage and product transfer activity has continued, for example. However, we have certainly been seeing a shift in their priorities. 

Looking after the needs of existing customers has, quite rightly, taken precedence over everything else during the crisis.

It should be noted that lenders’ customer service teams are people too, facing the same demands and challenges as everyone else, while experiencing huge increases in demand for their services.

Many customers have requested so-called mortgage payment holidays. UK Finance recently reported that an average of 61,000 were being granted by lenders per day. 

Lenders are managing these enquiries around mortgage payment holidays with care. They are not always the best option, and it is important to ensure the benefits of applying for one are not outweighed by increased costs in the future. This is particularly relevant for customers near the end of their term.

The customer service challenges faced by lenders have been made harder by the fact that many staff are falling ill themselves, have needed to self-isolate because someone close to them has contracted the virus, or are concerned about protecting a family member who is especially vulnerable. 

One lender suggested that up to 30% of its key staff have been unable to work at any one time during the coronavirus outbreak.

Mortgage rates are at record lows, and there are some good products on offer across the market for those borrowers approaching the end of their terms, although the range of products has contracted as lenders simplify and streamline what they can offer.

The role mortgage brokers play is arguably more important than ever. Brokers can identify the most appropriate options for their customers, many of whom will also be looking for reassurance and support in terms of what they can afford going forward.

The roles brokers and lenders play in supporting customers now will help lead the market back to stability and growth as things return to normal.

The overall outlook for the market is highly uncertain, but there are signs that suggest the initial stages of the crisis may have passed. 

There is room, therefore, to retain a sense of optimism for the market and how it could look come autumn, when we would normally expect a rise in activity levels.

Reaching that point will require a great deal of collaborative hard work, understanding, and an element of compassion across the industry.

The industry has shown before that when the chips are down, it can rise to the challenge.