Working together to navigate the changing market

Responding to the needs of customers affected by the COVID-19 pandemic, mortgage payment holidays can be extended for a further three months, under plans from the government and regulators.

The availability of a three month mortgage holiday was first announced in March as part of an unprecedented package of support for individuals, businesses and the economy due to the COVID-19 pandemic. Figures from UK Finance show 1.86 million mortgage payment holidays have been issued as of May 28th 2020 – equivalent to one in six mortgages.

Regarding the mortgage payment holiday scheme, on April 3rd 2020 Springtide Capital cautioned:

“The money you save from a payment holiday will need to be paid back at some stage during the lifetime of your mortgage and are specifically aimed at those that find themselves in financial difficulty. We encourage you to speak with one of our experienced brokers and we will help you understand the pros and cons specific to your mortgage. It is important that you understand the potential implications and all your alternative options”

Springtide Capital further strengthened their position later the same month stressing that borrowers should only take a repayment holiday as a “last resort”.

What to expect:

The Financial Conduct Authority (FCA) has published new draft guidance for lenders which will set out the expectations for firms and the options available to their customers. Following a short consultation, the guidance is set to come into force imminently and lenders will contact their customers whose mortgage holiday is coming to an end.

The outline guidance is set out as follows:

  • Customers who can afford to return to full repayment should do so in their best interests– at the end of a payment holiday, firms should contact their customers to find out if they can resume payments and if so, agree a plan on how the missed payments will be repaid.
  • Anyone who continues to need help gets help– lenders should continue to support customers who have already had a payment holiday where they need further help. Firms are expected to engage with their customers and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this firms should consider a further three-month payment holiday.
  • Extending the time the scheme is available to people who may be impacted at a later date– customers that have not yet had a payment holiday and experiencing financial difficulty will be able to request one until 31 October 2020.
  • Keeping a roof over people’s head during a public health crisis– the current ban on repossessions of homes will be continued to 31 October 2020. This will ensure people are able to comply with the government’s policy to self-isolate if they need to.
  • Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, consumers should remember that credit files aren’t the only source of information which lenders can use to assess creditworthiness.
  • This guidance would not prevent firms from providing more favourable forms of assistance to the customer, such as reducing or waiving interest.
  • Firms should consider signposting customers towards sources of debt advice. Debt advice may be helpful for customers coming to the end of payment holidays and may be particularly useful for consumers with pre-existing payment shortfalls or who are likely to be in longer-term financial difficulty.
  • When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and consider how they engage with them. For customers who aren’t able to use online services (such as digital channels), firms should make it easy for customers to access alternatives.

Christopher Woolard, Interim Chief Executive at the FCA, said: ‘Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice. Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available.’

It has been recently reported that Joe Garner, chief executive of the Nationwide Building Society has stated that a borrowers credit file should be marked if they take a further mortgage holiday. It has not yet been decided whether further mortgage repayment breaks will be marked on credit files. Currently, lenders can see whether a holiday has been taken without it being negatively marked on credit history.

Henry Knight, Managing Director of Springtide Capital commented:

“Our advice remains the same, a mortgage holiday is only for people who absolutely need one. We are pleased guidance is being set out but we urgently need to hear from lenders to understand how this further mortgage payment holiday extension will impact borrowers. Brokers need banks to be transparent on the implications of a borrower taking a mortgage holiday”

This is a difficult and changing time and it is not yet apparent what the long-term impact of the payment holiday scheme will have on both borrowers and the market. To a large extent, the majority of the financial effects of the lockdown have yet to be fully realised, but ultimately it serves no one’s interests if a borrower takes on an unaffordable mortgage.

The mortgage payment holiday scheme is a vital lifeline to those homeowners who are suffering financially due to the impact of the COVID-19 pandemic. But, whilst helping with short-term cash flow issues, a full understanding of the implications of a mortgage payment holiday must be thoroughly investigated. Lenders must be transparent in how they are going to view or interpret information in the medium to long term. The mortgage market has a strong appetite to lend and is committed to helping those customers who need assistance. The upcoming regulation from the FCA will help provide certainty for all parties.



Positive steps

The housing market has re-opened to a promising start in England. There is cautious optimism as new regulations have been embraced and practices modified. The changes made to accommodate the COVID-19 pandemic have been many and the industry has proven to be resilient and flexible.

Safety First

Restrictions began to ease three weeks ago with comprehensive guidance published by the Government. This document is frequently updated. Pan industry guidance from the Royal Institute of Chartered Surveyors (RICS) has supported the return to work of thousands of support professionals who play a critical role in the housing sector, specifically on physical inspections for mortgage valuations and home surveys. The document that outlines safe practices is relevant to property agents, lenders, mortgage advisers, property lawyers/conveyancers, surveyors, energy assessors, property managers, home removal and associated professionals such as contractors involved in the property development, management and the home moving processes. Ensuring social distancing practices are adhered to has proved key to re-opening safely and to regaining buyer confidence.

Surge in buyer demand

Buyer demand across England surged by 88 per cent after the housing market reopened, figures from Zoopla show (correct as of 27th May 2020). The website detailed that almost 60 per cent of buyers in the UK are planning to continue with their search for their next property. Although, 41 per cent said they have put their plans on hold with loss of income, uncertainty in the market and lack of confidence in future finances given as reasons for this decision.

Richard Donnell from Zoopla commented:

“The scale of the rebound in demand for housing is welcome news for estate agents and developers, but it is also surprising given projections for a sharp rise in unemployment and a major decline in economic growth. Many households are likely to have re-evaluated what they want from their home. This could well explain the scale of the demand returning to the market.”

Mortgage enquiries

Brokers were unfurloughed and advisers returned as mortgage market activity increased. As solicitors returned to near pre-lockdown levels, completion dates are now being set and purchases progressed.

Searches for products and mortgage deals across the housing market started in earnest and the number of product illustrations downloaded by brokers has increased for the fifth consecutive week, data from Mortgage Brain reports. Mortgage Brain highlights a number of interesting facts (data correct as of 3rd June)

  • Over the past seven days the number of European standardised information sheets downloaded by mortgage advisers increased by 11.5 per cent.
  • Volumes have increased by 27.7 per cent since the housing market formally reopened three weeks ago and by 43.7 per cent from the lowest point seen in the week ending April 26.
  • However, ESIS downloads are still down by 23.7 per cent on the nine-week average to March 16.
  • The number of available mortgage products now stands at 8,635, which is 2.2 per cent higher than last week and 16.3 per cent higher than the low point in the week ending April 12.

Kevin Roberts, director, Legal & General Mortgage Club notes also that there are many promising signs:

“We saw lenders …returning to 90 per cent LTV and my conversations with advisers across the market suggest that they are seeing positive interest from clients as well. Our data also shows that adviser searches on behalf of a wide range of customers, from first-time buyers through to landlords, are increasing too.”

Henry Knight, Managing Director of Springtide Capital commented:

“The initial surge in the market is a welcome sign. The substantial amount of effort to make this happen whilst securing the safety of all parties is a huge achievement. All involved in the industry, my own staff included, have proved to be flexible and resilient in adapting practices and procedures in line with regulations throughout the COVID-19 pandemic. It has been inspiring to see the dedication from all involved, and to see how the market continues to evolve to meet the unprecedented situation we have all been faced with”

First-time buyers and key workers will get 30% discount on new homes under the government’s proposed new ‘First Home’s scheme.

First-time buyers and key workers and will be able to buy new-build homes with a 30% discount under a new scheme being proposed by the Government. It will be designed to help people in areas of high demand, who would be unable to afford to buy a home locally without the discount. It is anticipated that it will enable first-time buyers in England to save an average of nearly £100,000.

The government consultation for the design of ‘First Homes’ is currently underway. Key workers, such as nurses, police officers, firefighters, and teachers, as well as armed forces veterans, will be given priority to take advantage of the initiative.

There is no doubt that it will require time and patience for the market to fully recover. There is much uncertainty about what lies ahead and many pressures we face are still present. Economically we will face significant challenges. Some areas of the market may take longer to bounce back than others, for example purchases by overseas clients will remain slow until travel restrictions are lifted. But there are also many positives and the way we have reacted and adapted within the industry is heartening. There is much liquidity in the market, lenders are keen to lend, backlogs have been cleared and initiatives are present to help those with financial challenges. As an industry we have pulled together successfully and are ready to help buyers with their next steps.