Mortgage market ‘weirdness’
Rory Joseph is director and Sebastian Murphy is head of mortgage finance at JLM Mortgage Services.
A few weeks into the new year and we can’t help feel there’s a sense of other worldliness about the mortgage market at present.
On the surface, everything seems to look normal, enquiries keep coming in – in fact we’d definitely say things are very busy, a growing number of lenders are pitching back into sectors they vacated last year – notably high LTV, many BDMs seem to have a renewed vigour based on the significant lending targets they have to hit this year, and 2021 has the initial hallmarks of a year that looks likely to go well.
And yet…delve even slightly beneath this surface and there is enough ‘weirdness’ to have you scratching your head. It’s like the mortgage market is the on-screen version of The Truman Show, with all somehow not as it seems behind the scenes.
For instance, there is the ongoing impact of COVID-19 and the pandemic which was bound to influence how lenders approached the market, particularly given the working situation for so many lender employees.
It doesn’t seem too harsh to suggest that some lenders are struggling massively from a servicing and operational point of view, although you might have thought that after nine months post-Lockdown 1 there should have been significant improvements.
Plus, market demand has been high for a long time now, and to have backlogs or service issues of the type which cause you to pull out of product sectors or to be pricing at levels way above market-leading rates, seems to represent something more.
The ‘big’ news over the course of the last few weeks has been Santander’s decision to stop lending to the self-employed at above 60% LTV. The reasons given focused on Lockdown 3 and the extra time it takes to review self-employed borrower cases.
But the latter point has been the case for a long time. Why not make this decision back in November? It is truly unacceptable for a lender of this size, who have excellent BDMs willing to do so much for you, who have the best self-employed criteria, who are willing to look at the most recent year’s accounts, etc, to be in such a position.
It cannot be right that a lender is able to process an employed case in 10 days and yet a self-employed one takes eight weeks.
Of course, Santander should not bear the full burden of what is happening in the self-employed space. It might have pulled back to 60% LTV this year, but others pulled out of the sector a long time ago, a dereliction of duty if ever there was one, and it’s such decisions which have added greatly to the minefield that is trying to get a mortgage for someone self-employed at the moment.
There are other areas of the market which also feel unnatural. At how many points in recent mortgage market history, would you have the biggest lender in the country out with a product range which was pretty much almost 1% higher than the best buy rates in a number of LTV bands?
Because that’s what we currently have with Halifax – a lender which traditionally would be in the top two or three and yet now seems a million miles away from those lenders who are at the top of the charts.
It just feels strange to know this, and again we’d be the first to acknowledge that these are not normal times and with a new lockdown and with service centres in parts of the country which might have even tighter restrictions, it could be difficult to manage staff and it must be difficult, but to still seemingly be so uncompetitive in its core areas. Eh?
Halifax is not alone of course. Other lenders look like they have – perhaps momentarily – lost their appetites, even with all the talk of big lending targets to be achieved this year. Perhaps this is why we have UK Finance predicting gross mortgage lending of £215bn this year, and IMLA suggesting it will be £283bn – that’s a big gulf for organisations made up of the same membership.
It perhaps leads us to say that no-one quite knows how this year will play out. It’s perhaps why some lenders’ return to 90% LTV lending is not coupled with competitive rates, with one returnee suggesting the only reason they are back is down to Treasury pressure.
Are lenders – particularly the large mainstream players – hedging their bets in January, waiting it out to see what business they can secure without really having to cast the net too wide? If lenders don’t have that hunger yet, will we see it reversed in a few weeks’ time when they realise moving at their current run rates will not see them hit targets. Cue price cuts aplenty?
Who knows at present but as the saying goes, ‘this is not normal’, even if on the surface it presents something akin to normality.