The month the market changed – a look back at March 2020
What the difference a day makes – it could be the mantra of our current time.
In the space of the past month, the UK mortgage market has changed beyond recognition.
On February 28 the most-read story of the day was one regarding house prices. Nationwide had just announced that UK house price growth was at its strongest since 2018.
That same day the first British coronavirus (COVID-19) fatality hit the news. Tragically a tourist on board the Diamond Princess cruise ship, docked in Japan, became the first UK victim of the virus that is now plaguing the globe.
At this stage, the mortgage market was still at work – and rightly so. Meetings were taking place, brokers were seeing clients, lenders were visiting brokers and all was seemingly well.
With loans still completing and people moving home the UK was very much operating on the basis of business as usual.
It’s not to say that the coronavirus pandemic was not on people’s radar but for many it seemed a distant problem.
Places like Italy, Iran and Korea seemed distant and despite their issues with the virus there was a feeling that the UK wouldn’t be paralysed in the same way.
However, by 1 March, the virus had reached all four corners of the United Kingdom. By 2 March it was already hitting the mortgage news wires.
On that day Richard Pike, sales and marketing director at Phoebus Software, commented on a story from the Bank of England.
He said: “Coronavirus is already having an effect on worldwide markets and, of course, we have the EU negotiations kicking off in earnest again this week. Add to that the impending Budget and there is a lot for people to think about.
“Nonetheless, the general malaise the market has suffered since 2016 seems to be behind us for now so we have to be optimistic, the budget may well give us all a nice surprise.”
Little did Pike, or the rest of the market, know that the expected Budget would have to have a completely different focus to what had been expected. Stamp Duty would not be a talking point this time.
Just three days later the number of confirmed cases in the UK had jumped up to 115.
However by March 6 the market talk on coronavirus, at least externally, still remained relatively muted.
Again house prices remained high on the agenda. That day the Halifax reported that prices had increased by 2.8% in the year to February.
By 10 March, in a move somewhat ahead of what the government was to make public, TSB confirmed that it would offer mortgage deferrals of two months for those affected by coronavirus.
Natwest, Nationwide and Bank of Ireland were amongst other lenders offering mortgage holidays at that stage. Likely alerted by the government that plans would see a mortgage holiday recommended, if not mandated, by the Treasury.
On 11 March the Bank of England (BoE) cut the base rate by 0.5% to 0.25% in light of “the escalating situation caused by coronavirus”.
That day also saw Chancellor Rishi Sunak deliver his first Budget to the House of Commons.
This saw the Chancellor outline details of a £5bn emergency response fund to support the NHS and other public services in England.
He also laid out support for employers and employees facing the impact of the pandemic.
This included statutory sick pay for those advised to self-isolate and the ability for self-employed workers to claim contributory Employment Support Allowance.
Business rates in England were to be abolished for firms in the retail, leisure and hospitality sectors with a rateable value below £51,000.
By the next day finance businesses were encouraging staff to move towards agile working. Keystone was one of a number of firms to do this.
Let’s be frank this is a social industry. Be it seeing clients, peers or anyone this is a market full of social people. It was, and indeed is, a big change for many to move to this new way of working.
It was a move which marked the beginning of a change never seen before in the industry or, for that matter, the country in terms of working patterns.
For the rest of the week lenders and brokers worked to adapt to the new normal. Businesses ceased meetings and lenders looked to pass on the unprecedented BoE rate cuts to borrowers.
As the working week drew to an end the talk had moved almost completely to lender support for those borrowers affected by coronavirus.
Indeed the entire top ten most-read stories on Mortgage Introducer related to this topic as brokers and borrowers alike sought the latest information on the breaks.
The weekend of 14/15 March was the last normal weekend, so to speak, which we would see for at least while.
By the Monday the Prime Minister had recommended against all “non-essential” travel and was urging the public to stay away from pubs and to work from home where possible.
It was 17 March when the government began holding its daily press conferences – something that, in a relatively short time, we have all become accustomed to.
The very first of these press briefings saw the Chancellor pledge £330bn in loan guarantees for UK businesses.
He also confirmed that lenders would be giving a three-month mortgage holiday to those in need during the coronavirus crisis.
This represented an unprecedented government intervention in both the market and UK economy. One which has never been seen before and will likely never be seen again.
The industry was quick to welcome the support. Charlotte Nixon, proposition director at Quilter Financial Planning, was amongst the first to give their take on the package.
She said: “Today’s extra assurances from Chancellor Rishi Sunak that lenders will offer a three-month mortgage holiday will do a lot to quell the nerves of all those currently worried about their mortgage.”
However, she cautioned: “At this uncertain time three-months may not be enough for some people but Sunak did mention that this was just the next step of the government’s measures so borrowers may still be set to get more if the crisis is prolonged further.”
By 18 March the Prime Minister was outlining legislation to support private renters – including a repayment holiday for buy-to-let.
These changes included extending the option of a payment holiday of up to three-months to residential buy-to-let landlords who have tenants who are experiencing issues with their finances, as either a direct or indirect result of coronavirus.
This was coupled with a three-month moratorium on residential and buy-to-let possession action to start from 19 March.
Speaking at the time housing secretary Robert Jenrick said: “These are extraordinary times and renters and landlords alike are of course worried about paying their rent and mortgage.
“These changes will protect all renters and private landlords ensuring everyone gets the support they need at this very difficult time.”
As the market confirmed the packages that it would provide borrowers in these unprecedented times there was a realisation that the market, along with the country, was entering uncharted territory.
By the evening of Friday 20 March the Prime Minister made the historic decision to have the country’s restaurants, cafes and pubs close their doors as the government scrambled to contain the growing pandemic.
The following Monday there was a growing feeling that a lockdown was imminent. Many mortgage businesses had already made the transition to remote working but some still held out.
This situation, as with many times of crisis, showed the best of people. In the market we saw businesses put the welfare of staff over profits and lenders look to protect borrowers from the impact of the financial shock that the virus was causing.
The sector can be proud of its reactions to this difficult time.
The following week the government announced its NHS volunteer scheme which many in the industry have selflessly volunteered for. Another reason to show pride in the calibre of those who operate in this industry.
On the news front last week was awash with lender updates as the market worked to make sure the most up-to-date information was available to brokers and borrowers alike.
Unfortunately, we have seen loan-to-values (LTVs) cut by many lenders (however some are now bouncing back). The lack of the ability to survey property makes this a necessity.
We’ve also seen some lenders withdraw from lending altogether. Again this is, unfortunately, a necessity for many.
The week closed with the government effectively shutting down the property market for the foreseeable future. A move which will surely spook many people.
On a positive the government has moved to help the self-employed. This will be of some relief to many in the industry. We provide a rundown of the support scheme here.
As we enter the final days of March the crisis still looks far from abating. Indeed these are uncertain times in which we live.
We now look towards April with uncertainty about what lays ahead. However, and I know this is easy to say, there needs to be positivity.
It is easy in any period of crisis to look at the negatives. But remember this market has been through tough times before and has come back strong.
The government remains committed to ensuring businesses survive. Some lenders are still out there making things happen despite the crisis and the fundamentals that have been built over recent years will not disappear overnight.
The market will come out of this crisis stronger and more united – much like it did after the Great Crash. Times may be uncertain but this will not go on forever.
The community needs to unite and support the industry, support one another and look out for those, be that borrowers, brokers, employees, clients, or your loved ones, who need help.
As former US President Lyndon B. Johnson said: “Yesterday is not ours to recover, but tomorrow is ours to win or lose.”
Let’s make sure the sector is in a position to win the day when this crisis is over.