Special Features

Year in Review: residential lending in 2020

Rozi Jones
24th December 2020
resi year in review
"We could well see more players entering the “near prime” lending market, as the market reacts to the effect of borrowers who have been furloughed and that have taken payment holidays."

2020 has been a very unusual year. A global pandemic has drastically changed our day-to-day lives and - in many ways - our industry. To look back at how the past twelve months has affected how we do business, Financial Reporter will be sharing a series of Year in Review pieces covering different sectors of financial services. Experts from across the industry will share their thoughts on 2020 and how we can look forward to 2021 - in the last piece, we look at the residential mortgage market.

Here's what some of the biggest names in protection had to say about this year and how the market will continue to change in 2021:

Daniel Payne, managing director of Fluent Mortgages, said: "Throughout 2019 The Bank of England base rate was 0.75% however this was reduced to 0.25% on the 11th of March and again on the 19th of March 2020 to 0.1% to help control the economic shock of coronavirus. Lenders have understandably taken a more cautious approach to their product ranges due to the operational and potential economic impacts that have been experienced as a result of the pandemic. Not only has there been a significant reduction availability but the cost of borrowing for low-deposit/equity borrowers has increased substantially across all mortgage types over the last 12 months. The cost of a 90% loan-to-value (LTV) two-year fixed rate mortgage has jumped by more than 28% between November 2019 and November 2020. In monetary terms that means the cost per £1,000 borrowed has grown from £4.06 to £5.22 over the year."

Richard Pike, sales and marketing director at Phoebus Software, commented: "If you look back historically to mass unemployed and rising arrears, this will undoubtedly lead you to think that we only have recession and hard times to look forward to.

"But in times of rising arrears volumes, this can also provide opportunities for those looking at trading books, and generally speaking, those books with higher levels of non-performing loans will be available at reduced prices and this will encourage higher numbers of portfolio trades.

"Following the early days of the last global crisis, we saw a lot of this type of activity, and those with high levels of automation in their collections and special servicing activities were able to work out this debt very effectively and then, in some cases, trade the portfolio again at a profit in the following years. But let’s not forget the value of the originations market in uncertain times.

"The originations market has been a good barometer of risk appetite since March, but next year I believe the industry will innovate and continue to fund mortgage completions for those that can prove sustainable income levels. We could well see more players entering the “near prime” lending market, as the market reacts to the effect of borrowers who have been furloughed and that have taken payment holidays."

Andy Scaife, CEO at O’Neill Patient, added: "Q1 2020 was positive, confidence was building in the market and we got off to a strong start. Then Covid happened, posing a significant challenge and forcing us all to work differently. Our investment in cutting-edge technology, remote working and supervision practices meant that our hard-working employees could continue to carry on looking after brokers and their clients with the same high quality service levels we are known for.

"The shot in the arm for the property market came in July with the Stamp Duty Land Tax holiday announcement. This, combined with the release of pent up demand, flooded the industry with purchase work as the nation got on the move. This deluge of work has come with its own set of unique challenges and we are now heading to a significant pinch point on 31st March 2021. It is only by working collaboratively as an industry, being realistic and managing expectations that we will get through the coming months.

"My takeaway from this year is the need to keep the focus on working together, the strength and ability shown by our valued teams to adapt and work under pressure in unprecedented circumstances and, all-in-all, a resilience shown by all of us to overcome anything that we are faced with."


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