"There appears to be a lack of understanding about why people might want to purchase right now, the properties they might want to buy, and the risk attached to those purchase plans."
At the start of the year, there might have been many within the mainstream lending market who were anticipating that purchasing would drop off considerably, but we’ve certainly not seen that.
On the flip side, has 2022 really been remortgage-heavy? Certainly, it has ticked up in terms of transactions, but not at the expense of purchasing; indeed, from our perspective we might be conducting approximately 50:50 in terms of our remo/purchase split, but if there were more properties for sale, we would be doing more purchase mortgages.
That appears to have been an outcome a number of lenders hadn’t believed possible. The assumption being, that after the end of the stamp duty holiday, with that incentive taken away, there would be very few people wanting to purchase and pay ‘full’ stamp duty amounts. In a sense, the purchase market was assumed to be returning to a time when it was only the result of death, divorce and distress.
Perhaps to some lenders, this was the most likely outcome post-Government intervention? Again, an assumption that staying put was going to be the go-to decision, especially given there was no tax incentive to move. But, of course, there are great swathes of people who don’t want to stay put. Quite the opposite.
They are actually weighing up the changes in work practices and environment that the pandemic brought, and deciding for a whole host of reasons, that a move elsewhere is both desirable and beneficial. Particularly if they don’t have to commute into an office or workplace five days a week. In that sense, we are seeing a real ‘natural migration’ of workers.
Plus, of course, after the best part of three and a half years of Brexit, followed by over two years of a pandemic, where they might have felt the need to sit on their hands, many feel they are now in a position to act and seek out the property they actually want to live in, rather than stay in one which doesn’t suit.
That being the case, it will be apparent that certain lenders have to get rid of those ‘year of the remortgage’ assumptions, and gear (and resource) themselves up for a much more active purchase market than they anticipated.
Because of this, the big area of focus has to be on resource, because at some organisations there is clearly a huge disparity in terms of the work coming in and the resource available to deal with it. Why else might we be having to wait on hold to lenders for hours at a time, why else is it taking so long to even consider the ‘paperwork’ we send through, why else are lenders continuing to price upwards in a clear attempt to disincentivise the recommendation of their product range?
It feels like a restaurant where three years ago you had 12 people serving, but now you have four, and as a result you are charging your diners £40 extra for their meals, but at the same time will make them wait hours for it, and when one of your overworked staff members do finally bring it to their table, it’s going to be cold.
Also, because of a belief that the purchase market would be hitting nowhere near the heights of 2021, there appears to be a lack of understanding about why people might want to purchase right now, the properties they might want to buy, and the risk attached to those purchase plans. Why else would you demand a buy-to-let landlord put down 35% deposit for a new-build and a first-time buyer 10%? Where does the greatest risk lie between the two?
And what about helping purchasers get onto the ladder, or add to their portfolios, rather than putting obstacles in the way? Because when you are asking a young borrower applying for a two-year interest-only mortgage over a 35-year term what their pension income will be aged 70, you can’t really be serious about that information impacting the lending decision, can you?
You might suggest the decisions you are currently making around who you lend to and what you offer them, your pricing skywards, your poor service metrics, etc, are somehow to do with wider issues. Global and political ramifications being brought to bear on your ability to lend to UK borrowers, but that would simply be another red herring.
Essentially, what we need to see here is a recognition that purchasing remains a very vibrant part of the mortgage market landscape. It hasn’t fallen off a cliff; prospective purchasers aren’t holding back in their plans to buy, and therefore lenders need to put themselves in a far better position to deal with the levels of business we are all seeing in the adviser space.
In a very true sense this continued demand and activity in purchasing is good news and we need, as an industry, to react positively and be much more prepared, for it.
