"Perhaps the most surprising part of this year has been the strength of demand for short-term finance"
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 - starting with specialist lending.
Here's what some of the biggest names in specialist lending had to say about this year and how the market will continue to change in 2021:
Marie Grundy, managing director of second charges at West One Loans:
“2020 started with an abundance of optimism in the second charge market off the back of the momentum built in 2019 where new business origination grew by 19%.
“The pandemic had an immediate and dramatic impact on the mortgage sector with the second charge market hit particularly hard dropping to a crisis low of £21m lending in May. Coupled with the influx of payment holiday requests and the immense challenges this presented for both funding liquidity and operational resource, it seemed the perfect storm had been created. For those of us trading through the financial crisis of 2008 you would have been forgiven for thinking “here we go again….”.
“But here’s the good news. Unlike 2008 the market has rebounded with gusto with the latest figures from the Finance and Leasing Association confirming completions levels of £68m in October. With many predicting a strong Q4 things are certainly looking up.
“Make no mistake there is an even bigger opportunity for seconds to continue this impressive growth trajectory into 2021. Remortgages are predicted to remain flat following the increased popularity of both product transfers and 5-year fixed rates. Home improvements are also on the rise as is the financial intervention of parents and grandparents looking to gift deposits to younger family members seeking their first property purchase.
“Let’s make 2021 a year to remember for all the right reasons – I, for one, am looking forward to playing our part in ensuring second charge mortgages become even more relevant to intermediaries and their clients.”
Louisa Sedgwick, director of mortgages at Vida:
“This has been a year like no other for the mortgage market.
“The specialist lending sector has clearly had a very important role to play supporting many […] borrowers, a growing number of whom have complex circumstances whether they’ve been furloughed or own businesses financially impacted by the pandemic.
“At Vida, we think that the role of specialist lenders is only set to grow in importance next year. Millions of people have been left in a vulnerable position because of this crisis and the financial impact of the pandemic threatens to exclude them from the mortgage market. These borrowers will need a strong specialist lending sector which recognises that their circumstances shouldn’t automatically prevent them from stepping onto or up the housing ladder and instead gives them every opportunity to find a safe place to call home.”
Craig McKinlay, new business director at Kensington Mortgages:
“It has been a year of two halves for specialist lending. On the one hand, the first lockdown saw most lenders withdraw product ranges. Lenders started to pull high LTVs to protect customers and process requests for mortgage holidays. Some left the market entirely. However, once the housing market started to re-open and was given much-needed stimulus by the Chancellor - through a stamp duty break - specialist lenders gradually returned to the market. However, there is still some hesitation to fully return to the 10% deposit range and while some are starting to return here, it will likely be next year when confidence returns.
“On the other, the pandemic has expediated certain trends. Specialist lending may soon become mainstream. In an incredibly short timeframe, customer circumstances changed. There are now far more individuals with complex, multiple, or reduced streams of income. Less will fit the traditional vanilla lending criteria of high-street banks and specialist lenders who already had a flexible approach to lending, understood that there will be new customer needs. Ultimately, this year has shown that specialist lending is more important than ever.”
Nick Jones, commercial director at Roma Finance:
“We’ve all been through the mill this year, but if you end 2020 with your loved ones around you and a steady income, you’re definitely one of the lucky ones.
“It’s been great to see the specialist sector pull together in 2020, and I hope it leads to a more collaborative approach to business next year and an even greater focus on improving the client experience.
“Perhaps the most surprising part of this year has been the strength of demand for short-term finance. During the first lockdown we prepared ourselves for significant falls in business but the stamp duty holiday and tightening of mortgage criteria, particularly for landlords, meant they never materialised. “
Louise Bunce, head of proposition and marketing at Ipswich Building Society:
“In terms of specialist lending, self build mortgages are an area that has seen significant interest this year, with people spending more time at home and realising the importance of creating a space that meets their needs.
“To help alleviate the UK’s housing shortage and to support the nation’s desire to build their own home as one in three express a consideration for a self build project, the government recently committed to reviewing self build laws to make it easier for people to build their own property.
“The interest in self build looks set to continue into 2021, as the self build dream can take a while to come to fruition. Lenders and brokers need to work together to ensure all parties are clear on precisely what constitutes a self build mortgage versus a residential one.”
Vikki Jefferies, proposition director at PRIMIS Mortgage Network:
“Since the onset of Covid-19, mortgage lenders and advisers have taken extraordinary strides to keep on top of an ever-changing market and evolving customer demands. Notably, this has involved using technology to ensure the industry could continue supporting customers amid the disruption and rapid shift to remote working. Digital platforms have not only enabled lenders to improve their internal processes and progress with cases both quickly and efficiently, but have also provided advisers with an opportunity to communicate with new and existing clients more effectively.”
Rob Barnard, director of intermediaries at Masthaven:
“The height of the crisis saw the adoption of remote and desktop valuations, for example, with many banks maintaining and nurturing positive digital relationships with brokers to ensure the borrowing process remained as efficient as possible. This digitalisation has been a positive step forward for the industry, which, combined with the personal touch, proved particularly fruitful during this testing period.”
Emma Cox, sales director at Shawbrook Bank:
“It’s been a difficult time for the property market, and of course the current landscape has left many facing challenges – especially within the bridging space, where some lenders had to halt business in this area for a period of time during the height of the pandemic. It is positive to see many of these lenders recently return to market, and as our report shows, to see that the housing market is moving again.
“Whilst some of this activity in the bridging market will no doubt be down to the releasing of pent up demand - something that Rishi Sunak’s stamp-duty holiday will support further - we are also seeing an uptick in investors looking at alternative strategies to sure up investments. The use of bridging to carry out refurbishments and conversions, as well as to aid chain breaks due to elongated sales processes, is an essential funding option that can support lucrative investment opportunities. We recently announced revised pricing across our bridging range, with rates now starting at 0.5% for both regulated and unregulated products, in order to show our continued appetite to aid brokers in making the most of these opportunities.
“The bridging market has demonstrated remarkable resilience throughout this year and, as much as we may face more challenges towards the end of 2020 and into the early parts of 2021, we believe this adversity may create opportunities for investors, and brokers, which Shawbrook plans to continue to support as much as possible”.