The market after the pandemic
Craig Middleton is head of mortgage sales and distribution at Harpenden Building Society
There is an increasing amount of research and commentary indicating where the industry might be heading after the pandemic.
Understandably, many people across the nation have been focussing on the immediate challenges of the lockdown, and the health and wellbeing of their family and friends. But as the lockdown begins to ease, many people are starting to rebuild and plan for the future.
At Harpenden Building Society, we’ve been looking at the latest research to enable us to help brokers as activity starts again.
We believe that the ability to create mortgages for very specific needs is going to be more important than ever, because of the volatility we will all experience.
The first question is whether people will have an appetite for house moves in the foreseeable future. Research by Rightmove suggests that demand has paused rather than fallen away, and people are still looking for new properties.
Rightmove saw almost 5.2 million visits to their site as the property market re-opened on Wednesday 13 May. This was up 4% on the previous year. In addition, rental demand returned with the highest enquiries in one day since last September.
In the middle of May, The Guardian reported on several different sources predicting where house prices will go. These ranged from a fall of 5% from EY to 13% from The Centre of Economics and Business Research.
Beneath these headline figures will be different trends according to the value of the property. For example, the prediction is that more expensive properties will require more negotiation.
In addition, different sectors of the economy will be subject to specific pressures. According to KPMG, limits on social gatherings could see the loss of over 40% of output in hotels and restaurants this year.
The hospitality industry will also find it harder to recover lost output next year, as cancelled travel plans and restaurant bookings will mostly be irreversible.
By contrast, manufacturing and construction should rebound strongly this year, benefiting from back orders that can be fulfilled once the lockdown is over, and the transport and logistics sector will benefit from the increased demand for home deliveries.
Which? reported that since the lockdown began, the number of mortgage deals on the market has halved, but there are still plenty of good rates out there – especially if you have a bigger deposit.
Data from Moneyfacts shows that average mortgage rates are at the lowest levels since it began keeping electronic records in 2007. Buyers with deposits of only 5% and 10% have been hardest hit by deals being withdrawn, with 90% of low-deposit mortgages falling by the wayside.
Now that the market has re-opened and in-person mortgage valuations are permitted, we may see some of these deals return in the coming weeks and months.
What this means for brokers
At Harpenden, all our mortgages remain available for buy-to-let, holiday lets, first time buyers and re-mortgages. We don’t believe we need constantly to review the range, deciding which products should remain according to different levels of risk and the latest trends.
Each application is assessed according to the circumstances and what we know about the broker’s client. We have always operated this way, and believe it will become increasingly important in a period of unprecedented economic uncertainty.
We believe that the complexity of applications is going to increase through multiple income streams, temporary and contractual employment, and the heightened threat of redundancies.
We’ll be better able to offer decisions in principle if we work with brokers to gain a highly detailed picture of the applicant.
Service all important
Applicants looking to buy a house are likely to be under more pressure than before the lockdown as employment security will be lower.
While there may still a strong appetite to make a move, the surrounding factors will be more complicated. The risks of negative equity, employment security, and income potential are increased.
This means that applicants could be asked for more information throughout the move. Lenders will need to support brokers more than ever before, easing their load by regularly talking directly to the applicant ourselves.
We think you can expect more lenders to be helping in this way.
To sum up, you won’t be surprised to hear that we can expect more uncertainty.
In addition, the complexity of applications could well increase given the changing economic landscape and intervention from government to control the recovery.
We think that greater co-operation between lenders and brokers will help everyone across the industry to manage this uncertainty and complexity. If a joint approach can make home owners and investors feel more confident, we will all be better placed to adapt to the new circumstances.