Guest blog: A cautionary tale

Originally published in BSA Society Matters Magazine - Autumn 2020

By Nick Lawler, Head of Business Development, DPR

Originally published in BSA Society Matters Magazine

By Nick Lawler, Head of Business Development, DPR

The lending sector is working hard to mitigate the impact of the Coronavirus pandemic on the lenders, brokers and consumers that work within it. While lenders are maintaining a responsible lending approach, they are also keen to meet the pent-up demand that the lockdown has created.

Much has been written about the state of flux in the types of borrowers that lenders will consider. A quick glance at best buy tables highlights a race to the bottom of the charts, with high LTV products carrying a very short shelf life.

The mortgage and property markets have numerous challenges ahead. The recent Bank of England (BoE) Credit Conditions Survey showed that banks and building societies expect activity in the housing market and LTV availability to improve in Q3 2020. The stamp duty holiday is expected to provide a further boost to the market and should hopefully boost activity over the next few weeks and months. Recent research from Legal & General found that 93% of first-time buyers report that they are still considering buying a home in 2020, with 51% saying they “definitely” will.

Risk appetites have changed and the economic effects of Covid-19 is causing lenders to reflect on their lending strategies. Lenders and brokers are balancing the needs of borrowers and the demands on them to lend responsibly. This current picture is boosting the opportunity for lenders to meet the demands of borrowers in areas outside of the mainstream arena. These more specialist lenders can operate outside the more rigid criteria base that mainstream counterparts use.

The mortgage market will see huge changes to borrowers’ credit histories, rising numbers of self-employed and ongoing credit issues while criteria will have to be adjusted to allow for furloughed staff and borrowers on mortgage holidays will also be under the microscope. Knowledge Bank’s mortgage criteria activity tracker show brokers’ searches up by more than two-thirds (68%) with ‘Covid-19: Temporary Maximum LTV Restrictions’ and ‘Furloughed Workers’ featuring heavily for the third month running. The ‘Temporary Maximum LTV’ term was also strongly represented in broker searches in the buy-to-let, second charge and bridging categories.

Commenting, Matthew Corker, lender relationship manager at Knowledge Bank, said: “Brokers cannot expect to keep up with the huge number of criteria changes without deploying technology”. Furthermore, research from online broker forum, Cherry, outlined that almost half of intermediaries are currently finding it difficult to place cases involving the self-employed.

The mortgage market is ever evolving and the last four months has led to an increase in opportunities for some, and witnessed a step change in the use of technology for most. The key for brokers and lenders moving forward is to embrace automation and a modern digital broker offering. There is a clear demand in the market and a trusted technology provider such as DPR can highlight the choices that are available.

The need to provide automated responses and decisions to help manage the numerous changes has never been greater. Digital onboarding is essential and will drive the application process incorporating customer relationship management tools, automated product recommendation, form filling capabilities and eligibility and affordability calculators. Providing accurate consumer qualification ensures that new clients are quickly comfortable with the broker and satisfied with the vitally important first contact. The more streamlined the approach, the more that digital onboarding can be tailored to the client from beginning to end.

By working with an established technology platform such as DPR, lenders can best meet the needs of all borrowers. Lenders and brokers that use technology to differentiate and improve the customer experience will be the ones that ultimately come out ahead.

For more information visit dpr.co.uk