Industry voices agree that the Covid-19 pandemic has both sped up changes that were happening to the mortgage industry already and brought a new dimension to the work-life balance.
MRM London sat down to talk with a number of key players about how things may look in the future. Below you can find out what they said in full:
Coreco managing director Andrew Montlake
Covid-19 has seen us all adapt, making some tough decisions, and as far as intermediaries are concerned, what will change is not just the way we communicate and deal with our clients but also in the way we work and our attitudes to large offices and a work-life balance.
We have all proved that being face-to-face, while important, is not the be all and end all, and that we can communicate with clients on Zoom or by phone effectively, which should enable us to help and advise more people.
Clients want to be dealt with in a number of different ways and want flexibility of choice. Why are we all rushing to a central city office location and wasting travel time?
The last few months’ experience will help to kick-start technology after many false dawns, but in the right way and not just for tech’s sake. It’s about high tech and high touch, as what this has proved even more is that people crave human interaction, whether on a screen or over the phone.
We must harness the power of technology in the right way to improve the customer journey and our own efficiencies. We have been pining for APIs, better ways to do ID and address verification, improvements to the inefficiencies of the conveyancing process and better ways to use data. This is a massive opportunity to listen to customers about how they want to see the mortgage market working.
We also need to make sure that we look after our back book of clients to keep them informed and to help educate a whole new generation of borrowers.
The way we manage people will also change to some degree. It is about being able to treat our people as adults, trust in them more and understand that a decent work life-balance can exist.
In the short term we will continue to see lenders play a bit of a waiting game in terms of what happens with the end of furlough, redundancies and house prices. However, I fully expect this to recover and lenders will then once again be more comfortable with the direction of travel and begin to get capacity and willingness to bring more risk back into the system.
By the start of next year, we should have a much more normal mortgage market once more, know what we are facing and so deal with it accordingly. We may well be a lot stronger than many people think.
Accord Mortgages director of intermediary distribution Jeremy Duncombe:
Once the dust has settled and many of the social distancing restrictions are eased, I think we’ll be left with a much more modern, fit-for purpose market.
Many of the changes we’ve had to implement, technological improvements such as increased use of AVMs and desktop valuations, for example were on the horizon, but have been accelerated by the pandemic.
Within Accord, moving from telephony to webchat for inbound queries has been hugely beneficial for both productivity and service – being able to get an instant and transcribed response to add to files has been a bonus for brokers.
An increased reliance on technology has also seen customers liaise confidently with their advisers via non face-to-face methods. Whilst I don’t question the importance of physical interactions, I suspect we’ll end up with a hybrid, which not only increases efficiency, but also makes advice more accessible for many who perhaps feel they are too busy to visit a broker.
And the value of advice will be much higher. I’ve taken part in a number of industry discussions recently and one of the main concerns from brokers, networks and clubs is how lenders will treat borrowers who find themselves, often through no fault of their own, in extremely challenging financial situations. These customers need expert guidance to help them get the right product for them.
Execution-only will be restricted to those who have very simple circumstances and there will need to be greater flexibility when considering self-employed, furloughed workers and those employed in particularly hard-hit industries. That’s where our common sense approach to underwriting will offer many the opportunity to have their case assessed on its own merits, rather than be limited by tick-boxes.
I’m extremely confident that, although there will be some challenges along the way, our industry will recover quickly and be stronger as a result. There’s been a lot of change in a short space of time, but there has also been a number of success stories as a result of the market working together to offer much-needed support. Brokers, networks, mortgage clubs, lenders and valuation companies, everyone has been open to collaboration to find effective solutions and improve the way we work, not just in current times, but in the future too.”
Twenty7Tec chief executive James Tucker
During Covid-19, video calls have become the norm. People are used to remote working, remote sharing and using apps to run all aspects of their lives. By 2030, I expect there to be a higher level of lifelong financial literacy and for people to be managing their portfolios of mortgage and loans much more actively and as a whole. It’s already beginning in savings and pensions and I think it’s going to spread quickly over the next year or two.,
Downturns and recessions give rise to future disruptors. I believe that the current economic climate and the need for a different economic model is no different: we’re going to see some great new solutions emerge over the next couple of years and what will have been predicted for 2030 may well be normalised a lot sooner.
London Money director Martin Stewart
If there is one thing to take away from the recent pandemic, it is the realisation that we don’t yet know what we don’t yet know. Each month, week and day is bringing new data, new ‘normal’ and plenty of new U-turns, all of which go to complicate even further what was an incredibly complex set of circumstances.
In fact, we can probably use a Churchill quote to sum up where we currently are: “A riddle, wrapped in a mystery, inside an enigma.”
Mortgage lending is a risk-based business where banks use hundreds of individual data points and place them in front of the macro-economic landscape. They then allow algorithms to make instant decisions as to whether a loan approval is the best interests of the bank, their capital and their shareholders.
Suffice to say that the rule book we thought we knew back in March has now been ripped up and a new one being written as of right now. This is because the lenders can see a tsunami of risk on their horizon brought about by rising unemployment, a significant economic downturn and genuine fear from the consumer about their health of their personal finances – oh, and we still haven’t got a vaccine.
The mortgage lenders are therefore currently trapped between a rock and a hard place – they want to lend but they are worried about who they are lending to.
We are already witnessing lenders taking a much more conservative and hard-line approach to lending. This will be set to continue for the foreseeable future and certainly until such time that GDP returns to some degree of stability.
But there will be losers along the way. The banks will examining self-employed and limited company directors in a feverishly forensic manner and it will be the job of the client and the broker to build as strong a case as possible to remove areas of concern that the lender might have .
But even those in previously long term employed positions will not be immune. I personally wouldn’t be holding my breath for a mortgage offer for clients of mine who work in tourism or hospitality. The first question is no longer: “how much do you earn?” It is now: “what sector do you work in? “
There will also likely be restrictions on income multiples and how much the client can expect the lender to agree to give them. Those consumers previously carrying some debt, a few kids and whose income was supported by overtime and bonuses might now start to be amazed at what they can get on just basic salaries – and not in a good way. Throw in a reckless rush for a mortgage payment holidays and the banks will question whether they should be doing any lending at all – the mortgage was meant to last 25 years but back in March people ran out of money after 25 minutes. This fact alone is one big enough to send the banks’ various risk departments into a tailspin.
Bottom line: every day is a school day now. The consumer could do a lot worse than planning months in advance for any house move or capital raising they wish to do. Forewarned is forearmed in the new Covid-19 reality.
Keystone Property Finance chief executive David Whittaker
As the economic and pandemic news fluctuates week by week all businesses across the UK are trying to make plans through to the end of the year – those with any perspective on 2021 clearly know more than the rest of us.
Whatever our challenges and setbacks, the finance industry has faced lesser cliff edge moments than retail, leisure and aviation, with early signs of a second wave on the continent dashing the tentative recovery of the overseas travel sector. We have been able to work remotely and maintain service delivery to our customers; the capital markets are open again with terms that can be absorbed even if they make competitive pricing difficult for those without ‘cheap’ access to the Bank of England’s term funding scheme.
Phase 1 on 16 March to was get everyone safe and keep working. Job done. Our IT teams should be proud of what they achieved and all colleagues worked hard to make remote working a reality. Were we 100 per cent effective? Almost certainly not but after 16 weeks, I believe a combination of enhanced processes, Teams and Zoom and integration of e-signature technology probably got us back to 85 per cent efficiency
Now we have moved into Phase 2 from 13 July and as a business based outside of London with colleagues able to drive to work, we have adopted a split shift pattern with five days in the office and five from home. We have a deep clean between shifts and office layouts have been adjusted to accommodate all measures.
When we planned our return to the office, we canvassed colleagues about their concerns or indeed background health matters for them or their family bubble. We have a few for whom it is appropriate to remain working from home at least until schools return in September but there was a surprising contingent that missed their office friends – principally the office dog! Our broader concern was that we all have been out of our comfort zones for far longer than expected so real human interaction allows our managers to really see that their teams are okay … anyone can out on a ‘show’ for a 30 minute Zoom call!
We don’t envisage a change to this model in 2020 – it will continue to evolve and processes will improve. Even the Land Registry announced this week that the most important document to any lender, the mortgage deed, will shortly move form wet signature to e-signature. I never thought that would happen during my career!
