COVID-19 outbreak: a balanced view of the mortgage market

Brian Murphy is head of lending at Mortgage Advice Bureau, and gives his balanced view on the mortgage market and current lending landscape, amid the Coronavirus outbreak.

“Our overall message to borrowers is there are clearly some short-term interruptions being experienced at this moment in time, but the market most definitely remains open, and we would expect things to settle down over the forthcoming weeks.

“This is a period of consolidation for most lenders whilst they recover their operational resilience and get back to normal with dealing with new mortgage applications, enquiries and underwriting as well as existing customers, which has been their focus in the last fortnight or so. Lenders are doing their best to adjust to the new demands placed upon them and aim to widen the range of mortgage products they can currently offer at the earliest opportunity.

“On the whole, customers can benefit from speaking to their mortgage adviser as they’re keeping abreast of how the different lenders are responding as things in the market are changing daily. At Mortgage Advice Bureau, our advisers have access to over 90 lenders, and we handle over £16bn worth of loans annually so it puts us in a good position to help borrowers and guide them to their lender.”

How have we got here?

“Due to the government measures around social distancing and only essential businesses like supermarkets staying open, this means any home movers with plans to move are unable to which ultimately is holding the market up. Viewings can no longer take place and estate agents are now, like many of us, forced to work remotely. Of course, it goes without saying these government measures are vital in stopping the spread of coronavirus and there is no other option at present.

“Lenders are now under incredible pressure to deal with an increased volume of new mortgage payment holiday measures put in place by government. To paint a picture, there are circa 10 million mortgage account holders in the UK, and we understand lenders have been fielding hundreds of thousands of enquiries from mortgage borrowers who have called their lender and tried to access a mortgage payment holiday. Borrowers are typically posing questions and wanting to understand about eligibility criteria, how do I apply, do I need to prove changes in circumstances due to COVID-19. That’s a huge increase in call traffic and one that is proving difficult for lenders to service. Consequently, mortgage lenders have had to divert considerable operational resource to cater for this significant increase in existing borrower telephone traffic.

“This is a capacity issue and we know, for example, that one mortgage lender which has large operational resource sited overseas has seen that facility completely shut down due to the measures applied by that country’s government due to coronavirus. Add to this, the wider societal and economic challenges we’re all currently facing, with many people now working remotely and some even off work due to sickness and self-isolation. There are also factors such as the technology we’re using when working from home not being the most efficient or the broadband connection just isn’t up to scratch – all adding to the capacity issues faced by lenders in dealing with customer calls.

“This is the very reason why some lenders are now reducing their Loan to Value (LTV) ratios as by doing so they reduce what are often the more resource-intensive elements of mortgage processing allowing them to focus their current finite resources on servicing existing customers. Therefore, we’re seeing the knock-on effect in the wider market, particularly disruption for new borrowers. However, not all lenders have done this and some have taken a more considered approach.”

How are we helping?

“We at Mortgage Advice Bureau have launched a national mortgage information support service to help people struggling with their finances as a result of COVID-19. This means anyone with a mortgage who thinks they might be eligible for a mortgage payment holiday can call us.

We’re here to help people who need it most during these unprecedented times. We’ve also created an online resource of FAQs which is updated daily. This includes some of the most common questions customers have about mortgage payment holidays or their finances in general.

What else is being done?

“Clearly lenders are significantly restricted under the current circumstances and the range of products they have on offer. This has been impacted by the effective withdrawal of all Chartered Surveyors from conducting physical valuations due to the social distancing measures introduced by government. Until that situation resolves itself, this will result in further delays with applications that require a physical property valuation sitting on hold until those restrictions are lifted.

“However, several lenders are trying to overcome some of the barriers the market is facing including increased usage of Automated Valuation Models (AVMs) and Desktop Valuations where surveyors can look at a property remotely without the need to visit. This means using a combination of technology, surveyor local knowledge and comparable property data to ensure a property’s value can be accurately assessed and business can continue.

"Of course, not all lenders can do this. Specifically, those lending in the more specialist sectors of the mortgage market, including sectors like new build, buy-to-let or affordable housing will remain restricted where lenders own risk appetites and insurers require physical valuations to determine the value at a given LTV, rather than being able to rely on remote working and technology. In those circumstances, delays will remain, but in other parts of the market, such as elements of the remortgage and product transfer market, business will continue largely as normal.”

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