Are there any upsides to the current situation? How does 2020 compare to the crash of 2008? And how might the Coronavirus have a lasting impact on the mortgage market?
“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it”
Ferris Bueller 1986.
The current lock-down has forced many industry changes
Nothing changes easily in the world of finance and with intense regulation, GDPR, Anti fraud measures and cyber security amongst the multitude of items to bear in mind when any changes are made, the idea of ‘if it aint broke why fix it’ can prevail. The current situation we find ourselves in has forced many changes within the industry which may end up making the whole mortgage process smoother and quicker in the long run.
Do we have the technology to progress?
In 2011 I decided to move to South Africa for 6 months. I was working as a broker. I had an admin team back in the UK to process the paperwork and so took my laptop which had encrypted systems on it, took a VOIP phone with a UK number and worked successfully from the other side of the world. That was 9 years ago!
This is NOT a repeat of 2008
I was also a broker in 2008 when the financial services industry took a hammering. Visions of 2008 came starkly into my mind a month or so ago and I have to say I got the fear. Speaking with a representative from a major bank yesterday, we reminisced about how we were ostracised. I remember in 2008 telling someone down the pub what I did for a living and then not being spoken to for the rest of the night, he said he told people he met that he was in stationary sales!
I think the difference between 2008 and 2020 is a wider sense of community, a realisation that no one is to blame and instead of doors being slammed shut, doors are open. People and businesses are trying to help each other and we will get through this.
Funding is still available
In 2008 funding more or less dried up. The housing market had previously grown at a crazy rate of near 10% and a large correction in the market was needed. Lenders were unwilling or unable to lend at high loan to values as credit dried up. Property prices plummeted.
In 2020 the housing market has been growing much more conservatively at under 2%, lenders are willing to lend and are actively trying to find ways to lend again. Yes, most products above 75% were withdrawn but that was simply because lenders could not send valuers out to check properties. Now we see loan to values moving back to 85%-90% as lenders and valuers have worked to create ways of valuing properties without actually visiting them. Everyone is working together to keep things moving.
A time of reflection and change
The number of housing transactions has nosedived, however we are receiving many calls from people who would love to purchase property and would like to get a mortgage approved and ready so they can move quickly and get a purchase agreed once lock-down is over. I have a feeling there is a lot of pent up demand out there and we may be very busy when the housing market is allowed out to play again.
So how might the mortgage process have changed long term? Well, brokers have always been a fairly flexible lot but often bound by the inflexibility of the marketplace we work in. I have heard of lenders spending huge sums of money and time on providing employees with laptops, phone systems & technology to ensure they can work securely from home. This allows them to work more flexibly and I have to say it’s a nice experience having a more personal conversation with the lender staff, hearing kids and pets in the background is really humanising and enjoyable. I do hope we continue with an element of this where possible.
Technology is enabling Lenders
Lenders have been working with valuers to boost their online valuation systems with valuers personally checking property online and using their local knowledge on property which may normally fail an automated valuation. This has allowed lenders to bring back some higher loan to value products and also complete automated valuations on Buy to Let properties which used to always need a physical valuation. This could speed up processing greatly in the long run.
Being forced to “stop and look around” at the technology which has existed for years but never been fully implemented has been, I feel, a real upside to the current situation.