"The stamp duty holiday has presented a major opportunity for intermediaries as buyers turn to them to get the best deal in a fast-changing market."
We spoke to Mark Bogard, CEO of Family Building Society, about what opportunities and challenges are currently present in the market for intermediaries and how Covid-19 will continue to affect the mortgage market into 2021 and beyond.
FR: The Family Building Society continued to lend throughout the Covid-19 crisis and indeed saw a record number of mortgage applications in August. Please tell us a bit about the Society’s experiences during lockdown.
Around a month into lockdown we asked our employees for their views on working life under lockdown. 89% felt the Society handled the changes to working practices well, compared to 43% who felt the government has handled the crisis well.
Before lockdown, almost all members of staff were office or branch based. The Society has had a fairly traditional approach to working practices, so the transition to adapting to social distancing and obeying the rules to stay at home, whilst maintaining high standards of customer service and support to members, was a major challenge.
By October some 30% of members of staff were working from the office on a rotational basis, in order to maintain essential IT, intermediary and customer service support. The Society reported a significant increase in mortgage applications year on year for Q3 2020, an increase of 85% over the same period in 2019. House purchase activity leads the way, almost treble what we saw in the same period last year. This shift is partly down to the award-winning Family Mortgage which accounts for a significant number of new applications, and of course, the stamp duty holiday. Before the pandemic three out of five new home loans were for were remortgages, but this has reversed since the stamp duty holiday was announced, with house purchase applications jumping to 61% of our new business. In spite of this jump in turnover our service levels have remained in good shape and our capable underwriting team is working well remotely. In addition, the average Family Mortgage (our blue riband tailored offering for first-time buyers) application is for a repayment mortgage of £258,000 over a 34 year term on a property valued at £284,000 at an LTV of 90%, from a borrower aged just under 30. Most cases involve a family member pledging equity in their own property as additional security.
FR: How has the outbreak affected the Society and what will be different going forward?
We are very fortunate not to be working in one of those sectors hugely and directly impacted. But some of our customers were. We had a number who required a holiday on their mortgage payments. I’m pleased to say that most are back on track now, but we have a small number still struggling. If unemployment rises significantly, then we are likely to see more people struggling.
We didn’t furlough anyone. We were quickly able to get almost everyone in the Society to be able to work from home. We always had some people in the office, as there are some things that are much more easily done there.
Working from home suits some people and it doesn’t suit others. That may be down to their temperament or their personal circumstances. We are definitely less efficient working from home – but how much is really hard to judge.
Most people, somewhat to their surprise, actually seem to prefer being in the office, perhaps mostly. And there are some things that are certainly much better done face to face – anything that involves real discussion and creating a solution to an issue for example.
Personally, I find endless Zoom calls a bit like sitting on a long haul flight – tiring but hard to explain why? My sense would be that we will get back to the old normal in due course, much more than people currently think.
The key for us was to keep our service standards up for brokers and members. We did that. We kept going. Our call waiting times went up but nothing like some of the big firms that lost their offshore call centre capacity. We keep all our BMDs going through out and brokers valued that.
FR: How will Covid-19 continue to affect the mortgage market into 2021 and beyond?
The stamp duty holiday has shown how the market can function more effectively if penal rates are taken out of the equation. The change has encouraged older homeowners to right size and has greatly improved liquidity. The Family Building Society has campaigned for change for many years and sees its stance vindicated.
House moves are good for the economy. People demand new goods and services when they move and it is right that younger people get a better chance to move into homes suited to the needs of their families.
New house building is much promised, yet so far not delivered. We hope the Treasury is paying attention and will not reimpose stamp duty at its former rate in 2021 when the current holiday ends. That could cause the market to fall off a cliff undoing the good seen so far.
FR: What opportunities and challenges are currently present in the market for intermediaries?
Our recent survey of mortgage brokers and intermediaries highlighted that applying and being accepted for a mortgage has become a much more complicated, time consuming and drawn out process since the start of lockdown, particularly with major banks.
Ever changing lending criteria, affordability checks and detailed due diligence, notably for self-employed applicants, are all clogging up the lending process. Call centre closures, lengthy telephone answering times and inadequate information on lenders' websites have also slowed the process down dramatically.
According to some 40% of brokers, lenders' websites did not provide enough information to answer their questions, particularly on the fluctuating changes in criteria and affordability, which in many cases seem to change daily. It is often the smaller details that require a human response, said one broker. Others preferred a phone call as searching a website took too long and often only generic answers could be found. Some lenders had closed their phone lines during lockdown.
The stamp duty holiday has presented a major opportunity for intermediaries as buyers turn to them to get the best deal in a fast-changing market.
FR: If you could see one headline about the financial services in 2021, what would it be?
'Building societies lead the lending pack', or 'Building societies provide the best service to borrowers'.