Originally published in the Summer edition of Society Matters magazine
By Sarah Howe, CEO, Harpenden Building Society
At the BSA Conference in May, Sarah Howe chaired a panel session exploring options to overcome the challenges faced by lenders and the mortgage industry as we emerge from the pandemic.
The panelists in the session at the BSA Conference wasted no time in getting to the heart of the key challenges facing the mortgage market. Whilst recognising government interventions, they questioned whether they will make a long-term difference or just prop-up the mortgage market in the short term.
There’s no doubt that some of those interventions, such as the stamp duty holiday, have created a buoyant market; whilst others have supported struggling homeowners, with households financially impacted by the pandemic taking mortgage payment deferrals. One task for lenders is balancing resource between the demand for new lending and supporting borrowers in financial difficulty.
Affordability for first-time buyers is front of mind when discussing mortgage market challenges. The panelists raised the issue of the 3% stress test not being fit for purpose; the usefulness of having affordability assessments that include rental payments and the possibility of a privately-funded Help to Buy scheme.
Post-pandemic there has been some positive news for first-time buyers, with the return of 5-10% deposit mortgages. However, with house prices jumping 10% in the past year, has this provided the lifeline first-time buyers desperately need? Or does the industry need to look creatively at minimum or no deposits and introduce new ways to mitigate risk, such as mandatory insurance?
Considering the new build market, Kate Faulkner of propertychecklist.co.uk suggested the FCA should look at how to build appetite for new homes, on the basis that the better the demand, the more homes will be built and the more we can mitigate the housing supply crisis. She also highlighted the need to build new homes suitable for older people to free up family homes.
Robert Sinclair of AMI & AFB highlighted the lunacy of heating systems going into new homes that will need replacing before the NHBC guarantee expires, to meet net carbon zero targets. He noted that heat exchangers are currently the main alternative, but they may not be the solution to achieving longer term targets.
In 2021 it would be impossible to have a discussion on such a key area of the financial market without considering the role of technology. Recognising the pandemicinduced move to a largely remote workforce, lenders are now looking at how technology can support a more permanent move to flexible or hybrid working.
From a customer perspective, the panelists considered the value of Open Banking. Daniel Broadhurst of nCino, highlighted the ability to streamline the underwriting process, enabling faster decision-making. When challenged on how this automation fits with the building society USP of manual underwriting in niche markets, he discussed that easy access to data supports a flexible approach with greater speed.
Also worthy of note, were comments around buy-to-let lending and how lenders can play a role in tackling unsafe rented homes. Should they only lend to landlords who can demonstrate their compliance with the letting rules and regulations?
In summary, it was clear that there are many examples of the mortgage market emerging well from the pandemic, but just as in any other time in our history there continue to be opportunities and challenges that the whole industry could and should be considering
1. Sarah Howe, Chief Executive, Harpenden Building Society
2. Robert Sinclair, Chief Executive, AMI and AFB
3. Kate Faulkner, Property Market Analyst & Commentator & Managing Director, Propertychecklists.co.uk
4. Daniel Broadhurst, Regional Vice President of Sales, nCino EMEA