In Focus: Vulnerability  

How well did lenders respond to 2020?

This article is part of
In Focus: How Covid has left the mortgage market exposed

"Culturally speaking that is chalk and cheese from where they were during the financial crisis. We need to acknowledge this more and also take the positives in terms of how the regulators have helped turn that situation around."

Vikki Jefferies, proposition director for Primis Mortgage Network, echoes Mr Stewart's comments: "Since the start of the pandemic, we have seen many lenders withdraw higher LTV products and adopt a more cautious approach to lending as they respond to ongoing market challenges and constraints.

"Nonetheless, lenders have continued to provide brokers and end-customers with enormous support during this difficult time. To manage the unprecedented levels of demand, lenders have been working hard to redeploy staff to areas where they are most needed and provide employees with the tools to work from home – something which has been no mean feat."

Obviously technology has played a vital role here, but she adds: "Collaboration with distributors and brokers has also been a key part of lenders’ response to the pandemic.

"All three parties have been working closely together to understand the issues and challenges facing borrowers at this time, and developing financial plans that are in the best interests of customers.”

Ongoing concerns

Last year the FCA also published Tailored Support Guidance, setting out how companies should provide tailored support to mortgage borrowers who took their six months' 'holiday' but continue to face ongoing financial difficulties due to coronavirus. 

People's vulnerability has not been packed away with the Christmas decorations; Covid-19 is still around and the economic situation is not improving any time soon.

So how is the industry continuing to respond?

Although the highest LTV products may be harder to come by and carrying higher repayment rates than borrowers have come to expect, given how low the Bank of England's base rate is (0.1 per cent), the repayment rates are still way off the giddy heights of 15 per cent and more that were seen in the 1990s, for example.

This means monthly outgoings are unlikely to be suddenly, significantly exorbitant, and in relative terms, the problem lies not so much with lenders jacking up their interest rates but with the general economic situation caused by Covid. 

David Thomas, chairman of the Society of Mortgage Professionals and joint managing partner of Chadney Bulgin, says: “With interest rates at an all-time low, overall mortgage affordability is better than ever, with payments taking up less of most people’s net income.

"This means that for most people, the only real problem we’re seeing is a sudden reduction in, or complete loss of, income, as many have little or no savings to fall back on and this can quickly lead to arrears.