Since the re-opening of the English housing market on 13 May, there has been a surge in activity in the market with buyers and sellers both chomping at the bit to change their property after being cooped up for so long.
David Hollingworth, Associate Director at L&C Mortgages took some time to speak to me about his experiences of the market with regards to mortgage applications over recent months. He also revealed the steps that conveyancers can take to help mortgage brokers during the transaction process.
What volumes of mortgage enquiries did you receive in March, April, May and to date in June? If you are unable to give us a number what are the percentage increase and decreases?
It has been something of a rollercoaster in the last few months and that is certainly true of enquiry levels. The levels in April of course took a dip compared to March but that was predictable as the full force of lockdown was felt by everyone and the purchase market effectively closed overnight.
However, the numbers rebounded once the restrictions were limited and that trend has continued in June with comparable measures around twice the level that was seen in March. The recent stamp duty cut has only added to that spike in enquiries and those that might have considered their options may be incentivised to revisit whether they should reinvigorate their search for a new home.
Enquiries of course can be made up of all sorts of different types of enquiry, some that will be all ready to go, whether purchase or remortgage and others that may just be trying to assess what the impact of Covid might be on their own situation and the broader market.
Of course, what is hard to be sure of is whether the spike in enquiries is a short term combination of the pipeline business along with the sudden release of pent up demand from the lockdown or whether the demand levels are sustainable. There will certainly be some caution in the market until the CJRS and other support initiatives have begun to unwind but for now the volume is encouraging.
What proportion of mortgage applications have cancelled / failed to go ahead?
This has the potential to continue to change as the pipeline has not fully worked through. However, the percentage of cases that have simply cancelled has been surprisingly small and in single figures percentage wise.
Numbers could yet shift given there may be delays, a need to extend offers and changes in borrower circumstances. However, the overall direction has been for borrowers to carry on where they left off and there seems to be little in the way of diminished enthusiasm.
How are lenders dealing with mortgage volumes / how have turnaround times been affected?
Lenders went through some substantial challenges at a time when they were dealing with the need to work remotely as well as implementing processes to cope with the tidal wave of payment holiday requests. That inevitably had an impact on capacity at the time and at the same time the ability to progress purchase cases in need of physical valuation.
Lenders have been quick to expand their product ranges as valuations have reopened. However, there’s bound to be some capacity and resource issues that will remain for some time. Lenders dealt with the first wave of payment holidays but there will be potentially higher enquiry levels again as those holidays come to an end and those with ongoing issues consider their options.
How has underwriting changed? What additional questions are lenders asking for?
Lenders have of course had to adapt their criteria to adapt to the changing situation and impact of the pandemic. The majority have continued to accept furlough income throughout the crisis and as employees return it should be possible to look at return to work income where that can be confirmed.
The self employed typically need to demonstrate a track record of income over a couple of years but lenders have started to individually underwrite many self employed cases and/or ask to see current business banks statements to back the application. Lenders clearly need to be able to be sure that the mortgage will be affordable and sustainable.
In the case of pipeline cases, some would also require an element of rework for those that had a material change to their circumstances.
What can conveyancers do to assist mortgage brokers like L&C?
These may not come as a surprise, but the current situation has only helped to highlight that communication is key. The pandemic has perhaps helped to underline that point and whilst some of the following will appear obvious, they are likely to still be the most useful:
- Receiving regular, clear and concise updates on the conveyancing transaction. For example, when contract packs are requested and received, searches ordered and returned, the mortgage offer received and when the COT is submitted and draw down of funds requested.
- An organised process to try and avoid duplication of the collection of documentation by either party, for example ID and AV documentation, proof of deposit and tenancy agreements for BTLs.
- Sharing any information which may have a bearing on the mortgage approval as early as possible. Sharing of information that will be important to the mortgage lender could really help smooth the transaction, whether it’s that the proof of deposit matches what we have been told and submitted to the lender, leasehold information such as remaining lease term and ground rent provision.
Have you seen a rise in completions in June? Given your pipeline do you anticipate these continuing to grow during July and August, or to decline?
We actually saw a big jump in completions in May which may simply have been some business working through quicker than we would anticipate. I therefore don’t necessarily expect that an increase in completions will see linear increases and there could be some ups and downs.
However, what we do know is that the very high enquiry level is feeding through into applications and that should ultimately shift into completion numbers. That should especially be true as the pipeline dissipates. The other challenge currently is the lack of higher LTV mortgage products which will affect the amount of first-time buyer enquiries that can progress and the stamp duty cut will be a smaller incentive for FTBs as many will not have faced a bill in any case. I do expect that lenders will gradually return to 90% LTV products but for the time being it could be slow progress and has seen lenders dipping in and out.
Of course, the big question looking ahead will be how the winding up of Government support schemes, especially the Jobs Retention Scheme, will affect the broader economic backdrop. That could see some borrowers rethinking or coming up against new issues to deal with regarding their financial situation.
There is uncertainty ahead but the level of demand has been staggering and the stamp duty cut will only boost that. In addition, the mortgage rates on offer have remained extremely competitive or got even better, so mortgage affordability will be strong for those in a robust position.
