Paused for breath
Bob Hunt is chief executive of Paradigm Mortgage Services
Many in the industry will have paused for breath following the end of June and the end of the initial stage of the stamp duty holiday.
However, this is not a market that waits around, and it will only need you to look at the ongoing activity within the lending space to see that lenders, in particular, are not resting on any laurels following what has been an extremely busy six to 12 months, particularly in the purchase space. Their quest for business will not let up which is clearly a positive for advisers and borrowers.
This period between July and September is unlikely to be quite as busy, purchase-wise, as we have seen through the first half of 2021, although I think the suggestion that thousands upon thousands of transactions which may not have completed by this initial deadline will somehow be aborted is completely over-exaggerated.
My view is that the bulk of buyers/sellers will find a way to make those transactions happen and there could be a partial stamp duty saving to be had if completed pre-September.
As we know, this is a market which always has to have an eye on the road ahead and I suspect there will also be a large amount of demand to be worked through for the foreseeable future, plus a significant number of existing borrowers looking to remortgage, often to release equity, and all the other advice opportunities that come with existing clients/borrowers.
That, in itself, presents some interest possibilities for advisers, but there is the potential for a shift in the needs and circumstances of those existing borrowers, brought about by the pandemic, lockdown, and the economic impact it has had.
September will be a crucial month, not just because its end represents the partial stamp duty holiday deadline, but because it also means the end of furlough.
The most recent figures we have (for the end of May this year) show that 2.4 million people were on furlough, and while we might anticipate this will continue to drop (it was 5.1m in January), there could still be a significant number who find the government support turned off and the future looking less than certain.
Some within financial services, and specifically within the mortgage market, have begun to express concern that those borrowers who come off furlough might produce a ‘new generation‘ of potentially vulnerable customers.
That will be a major consideration for mortgage advisers who will need the most robust policies in place to be able to determine the vulnerability, or otherwise, of their client and to be able to act accordingly.
Earlier this year, the FCA issued further guidance to regulated firms on how to identify vulnerable customers, and there’s absolutely no doubting that this is a priority area for the regulator and it is expecting all advisory firms to take their responsibilities seriously in this area.
Determining whether a client may be potentially vulnerable and having strong yet subtle processes in place for advisers to follow if that is the determination is going to become an ever-greater part of the adviser/client relationship.
The potential detrimental outcomes that could result from not identifying vulnerability should be obvious to all, and therefore there is a very fine line to tread.
The FCA’s own ‘Financial Lives‘ survey – which it carried out last October – revealed that 53% of adults display a vulnerability characteristic.
That’s an increase of 3 million people since the previous survey took place back in February 2020, and of course the pandemic has played a major role here.
There’s perhaps a special consideration here for existing homeowners/clients who may have been impacted by the pandemic and lockdown financially, but are firstly unaware of what that impact has meant for them personally, but also what it means for them from a mortgage point of view.
Payment holidays may have been taken, furlough might be still ongoing, situations, needs and circumstances might also have shifted, so it’s going to require a real soft-skill masterclass from the adviser when dealing with these clients.
These have been incredibly difficult times for many individuals so firms should be prepared to use a kid-glove approach and to make sure the client is comfortable with the process and that the firm has everything in place to evidence the work they’ve done and the way the client has been treated. This is not an area to be overlooked, least of all now.