
"This situation makes it incredibly difficult for advisers to offer comprehensive, long-lasting advice when you’re relying on a client getting lucky with a property on the very day(s) those mortgages are available."
We know full well that the impact of Covid-19 is very different right across the piece, and everyone has needed to cut their cloth accordingly, but in some very key areas – most notably lender service levels and their approach to certain parts of the market – there has perhaps never been more of a time when a little consistency wouldn’t go amiss.
There are too many examples to fully cover in a piece like this but fundamentally certain lenders appear to have forgotten what they actually exist for.
In an area like high LTV lending, we have such acute differences that you have to wonder if some lenders exist in an alternate universe. It’s not ideal but those lenders who are dipping in at higher LTV for a couple of days are at least doing something and helping advisers service some of their clients. Others seem to be waiting for Government intervention and guarantees before they’re even willing to countenance being active here.
This situation makes it incredibly difficult for advisers to offer comprehensive, long-lasting advice when you’re relying on a client getting lucky with a property on the very day(s) those mortgages are available.
However, if this is going to be the way that lenders continue to offer higher LTV products, then there could be an old-school solution that would help those who are currently lending this way, and entice other lenders to enter this space. It lies in allowing advisers, over those limited time periods, to source an AIP on behalf of a client, have them pay the arrangement fee and allow them to book the funds. After that, the lender agrees to hold those funds for your client for a period of three months, or maybe more.
That gives the client time to find a property and embark upon the home-owning journey knowing they have the mortgage to be able to proceed. And if this isn’t done, they would lose the arrangement fee. This sorts out a number of ongoing issues for lenders, not least cashflow, but also their processes, because it would mean that on those days when they go to market with their LTV products, they are not inundated with mortgage applications which impact on their service even more. It’s likely they would get half their apps on those two days, and half over the next three months.
No-one denies that lenders are busy at the moment and up against some significant operational issues in the form of remote working, etc. And no-one denies that they’re not overly-inclined to lend lots of funds at high LTV levels, but such a solution would allow them to be able to plan and prepare ahead properly, and not put their service measures under any further undue pressure.
It might also help add to the number of products currently available to high LTV borrowers. According to Moneyfacts, in March this year there were 779 90% LTV products available, now there are 51; the same figures for 95% LTV are 391 and 12, and most of those come out in a piecemeal fashion over a very limited time period.
There are of course notable exceptions to this, and they should be applauded. For instance, what about HSBC, who during those dark days of lockdown effectively kept the entire UK housing market going, with their insistence on keeping active in the higher LTV sector, their excellent tech and overall having a much better handle on the market. And what about Metro who have not just dipped into the market for a couple of hours but come in, and stayed in.
That sort of certainty and the ability to rely on these lenders has been absolutely vital and integral to the bounce back we’ve seen in the housing and mortgage markets in recent months. But it is in no way universal, and there has been no real consistency across the piece, with – quite frankly – a number of lenders appearing to treat the market like it’s some UK-offshoot of the Wild West where anything goes.
At this time, it’s quite possible to look at the activities of the lending community and to draw a straight line down the middle in terms of who genuinely wants to help clients, and who simply sees this as an opportunity to ‘play’ in the market at a time when service levels have dipped considerably and borrowers are in greater need of products, particularly at the higher LTV level. Those who are effectively profiteering and relying on the fact that some borrowers have no other option, particularly if they’re an existing customer who has, for example, taken a mortgage payment holiday or seen their income dip, and yet still wants/needs to move.
Why not have a high LTV strategy and process as proposed above which will give lenders more control – they’ll have the ability to put different end-dates on those booked funds, be they three/four/six months – and allow them to widen the time period over when they’ll receive those apps, knowing that they’ve already been paid the arrangement fee. This will allow them to maintain service and still offer the higher LTV products that are required by so many borrowers at this time. It would help not just their own employees but everyone else like advisers and clients who are relying on them.
Clarity and consistency are required like never before – it’s within the grasp of most lenders to deliver it.