"We've got the valuations again, business is being done, and everyone is fully adapted to working from home. So hopefully, we're on a steady incline to some sort of business as usual."
Adrian Moloney of One Savings Bank, Steve Cox of Fleet Mortgages, and Paul Adams of Pepper Money, discussed the impact of Covid-19 on their businesses, as well as on lending and consumer behaviour.
Steve Cox commented: "If we go back to the beginning of March, I don't think any of us foresaw what kind of impact [Covid-19] would have on our lives and our working environments so very, very quickly. A number of lenders, including us, had to change and withdraw products at extremely short notice which is far from ideal. It's not the way any of us want to do business with our intermediary partners but we had very little choice. Without any physical valuations on, it ground to a halt.
"With physical valuations being available again, these are the first green shoots of a slow climb back to some kind of new normal. It's not going to be a light switch for a number of specialist lenders, just back to where you were. It will be a slow climb."
Steve said that funder appetite remains limited and the capital markets are "still effectively closed to securitisation". He predicts that while there have been some "green shoots in recent days", funder appetite is going to be curtailed for some time to come.
Adrian Moloney said that the return of physical valuations is "good news for the whole market", adding that there's "definitely a demand and it's picked up quickly".
However he asked the industry to "bear with us on valuations", adding: "There's not that flick of a switch where you can get through that backlog straight away, but that will happen and that will catch up."
When asked how long the backlog would be, Adrian said there would be a "couple of weeks there where you have to be patient".
Adrian added: "There's health and safety guidelines to adhere to, but that will come back. There are a lot of lenders that have started working through their pipeline. The positive thing is we've got the valuers out, that's what the market needed to get kick-started. We used desktop technology in the interim but that is very limited, especially in the specialist market. This is the first step in reopening the housing market. Physical valuations allow us to do more of the specialist business that brokers associate us with."
Pepper's Paul Adams agreed, stating that "we had a pipeline of business to go through and we were still accepting new business. The challenge for us was to make sure brokers and customers understood that, whilst we have a lending policy and lending appetite, this can not be the same as it is today".
He added: "Looking at that pipeline, we've had to talk to brokers and to customers to try and understand 'is this the right thing for you to do to proceed?'"
When asked whether Pepper Money had factored in increased payment holidays, Adams said: "It's something we'd been aware of over the past couple of weeks. We've done as much as we can to assist our existing customers with payment holidays and I think we're going to face another wave now."
The participants moved on to discussing what the future of the UK economy might look like as we move through the pandemic. Economists had forecast that the graph could look like a V, a U, or a W.
Steve Cox commented: "I'd like to hope it's going to be a V with a steep incline back to a stronger position. I think where we are at the moment, if you look at where the government is sitting in terms of the extention of furlough and payment holidays, etc, perhaps the government's perception is in reality that it's more of a U.
"From our industry point of view, the big indicator that we hopefully we had hit the botom of some kind of letter, was the fact we've got physical valuations again. Without that we were very much in the trough and a lot of us were unable to move forwards. My view is that we have hit the bottom. We've got the valuations again, business is being done, and everyone is fully adapted to working from home. So hopefully, we're on a steady incline to some sort of business as usual.
When asked how long the bottom of the graph might last for, Paul said: "From our point of view, it's going to be a challenging 2020. I can see it going on for some time, with recovery really starting to happen in 2021."
Adrian Moloney added: "These are very early days in terms of what we're going through, but this seems really different from the last downturn that I was involved in. Banks are well capitalised, they've got funds to lend and they're still seeing demand from a finance point of view.
"The remortgage market will remain good but purchase might take a little bit of a while to pick up for obvious reasons. But I'm cautiously optimistic in terms of how I see this playing out."
To view the full podcast, in which the four consider the impact of Covid-19 on mental health, why non-bank lenders are still important in the specialist lending market, and whether home working is an active consideration moving forward, visit: https://brightstarhub.co.uk/covid-19-mortgage-market-update-edition-seven/.
