"50% of prospective homebuyers in 2020 had been denied a mortgage despite having an agreement in principle, and 31% had lost a deposit on a new home due to delays in the deployment of their loan."
Prudent financial advice is currently in high demand. To navigate market uncertainty and make the right financial decisions, consumers and investors are looking to banks to provide them with the necessary support and guidance.
This is particularly the case when it comes to the property market. From the introduction of the Stamp Duty Land Tax (SDLT) holiday to the announcement of temporary mortgage payment relief initiatives, the government is seeking to support homeowners and promote a new wave of property investment. As such, banks have been forced to comply to the changing demands of the market.
Ultimately, this has resulted in banks and financial service companies adapting to the “new normal”; meeting the needs of their clients while at the same time mitigating any risk linked to the coronavirus pandemic.
The question beckons: how have banks performed? According to research by Butterfield Mortgages Limited (BML), customers’ experiences have been mixed. Some clients are not satisfied, and this is leading to a broader question of market confidence towards banks. I review some of the key findings from the research below.
Are clients satisfied with their banks?
Having surveyed over 1,200 UK homeowners and homebuyers, BML’s research revealed a quarter (25%) feel their bank has failed to actively provide advice during the pandemic.
This a significant finding and could signify the beginning of a wider crisis of confidence towards financial service providers if not addressed. If customers feel their banks are not providing the necessary support, consumer faith in the wider industry may be at risk. Action must be taken, then, to adapt banks’ advisory functions to better fit the post-Covid “new normal”.
BML’s research also measured homebuyer sentiment towards banks. We found that half (50%) of those who purchased a property in 2020 have lost faith in their bank as a result.
This is, again, a result of the unpredictability of Covid-19. After a large number of mortgage products were taken off the shelves during lockdown, the government’s implementation of the SDLT holiday imbued the property market with a surge in demand. Banks, in response, began offering such products once again to meet this sudden surge.
But one could argue that the mortgage application appraisal methods have not properly adapted to the new market conditions instigated by Covid-19. A separate piece of research commissioned by BML in June found that 50% of prospective homebuyers in 2020 had been denied a mortgage despite having an agreement in principle, and 31% had lost a deposit on a new home due to delays in the deployment of their loan.
Providing better support to customers
Without downplaying the frustration experienced by some consumers when banking during Covid-19, we must also acknowledge the challenges banks are facing as businesses. They must respond to the needs of their clients, while at the same time minimising their risk exposure so they can handle any sudden market shocks.
This makes perfect sense. Banks must act responsibly in order to avoid a repeat of the events witnessed during the global financial crisis. However, they cannot let these concerns overshadow the manner in which they engage with new clients and regular customers. This is all the more pressing in the current context, particularly as the UK could be on a brink of a second lockdown if Covid-19 cases do not subside.
Amidst the complications posed by the pandemic, I am confident that these will also spur financial organisations to become more agile and adopt new practices that ultimately enhance their products and services. Doing so will allow them to transition to the new normal and become positioned to effectively handle unforeseen events in the future.