May you live in interesting times, so the saying goes. Well, things haven’t been this ‘interesting’ in the mortgage market since the financial crisis back in 2008. If you’d told me we’d have everyone from Lloyds Banking Group to Vida Homeloans working from home en masse, one in nine customers taking a mortgage payment holiday (according to UK Finance) and a total moratorium on face-to-face contact in this most sociable of sectors, I’d have laughed you out of the room.
Yet, that’s exactly what’s happened. It’s certainly made for a unique 2020 and one that I don’t think anyone will forget in a hurry!
Lenders and advisers adapted with impressive speed to this new normal, but the specialist lending market is facing its own particular set of challenges. This crisis and the uncertainty it has caused has effectively closed down the capital markets on which many non-bank lenders, like Vida, rely on. Challengers to the traditional bank or deposit taking lenders, which together are responsible for circa £17bn of UK mortgages, secure their long term funding through securitisations in the capital markets. Additionally, non-bank lenders remain locked out of the Bank of England-backed liquidity schemes that are available to high street and specialist bank lenders. Whilst in itself this created an unfair playing field, the combination led to non-bank specialist lenders having no choice but to take decisive action by restricting or removing products, or even stopping lending in order to preserve the long-term future of their businesses.
The long-term effect could be damaging for borrowers if a solution cannot be found. Borrowers with complex incomes or circumstances, perhaps due to a recent or past life-events, will very likely be much poorer in terms of the choice of mortgage options available to them. And where there is a lack of supply available to customers, this usually leads to a more expensive outcome too.
Whilst there are signs of the first “green shoots” within the capital markets, these remain challenging times for the mortgage sector. However, there is still plenty we can do as a business to support borrowers and those working in our businesses. For Vida, the impact of COVID-19 has meant making difficult but prudent decisions as we do our best to protect our customers, our employees and our business partners - all to ensure we not only but survive but also thrive once the storm has passed.
When will we be back in the market?
We are now busy working on our re-launch strategy, which is exciting and certainly worth waiting for. In the meantime, we are patiently waiting for the securitisation market to re-open to enable us to restart our lending and get back to business.