During the Covid-19 pandemic the phrase ‘we’re all in this together’ became something of a motto. But, in reality, while everyone has felt the impact of this outbreak, the financial impacts are not absorbed equally.

Our personal ability to absorb the financial knocks, and in some instances devastating blows, of the outbreak is determined not only by our individual but also by our broader family circumstances.

As we have seen with certain sectors of the economy our individual ability to recover is not linear and some people need more support for longer than others.

A family affair

We can see already from our own experiences that people’s ability to financially navigate this challenging time are in many ways connected to those around them – and in particular family.

Grandparents may not become unemployed but their grandchildren might and the strains across the family unit will be immense for many.

Low interest rates for borrowers mean low returns for savers and meagre gains for pension pots.

The relationship between the generations of family members will play a part in determining how quickly we can emerge from this crisis.

If the strain is felt in one place it may well be passed onto another and conversely, the support of some by others may impact things like deposits.

Furlough and mortgage deferrals

Given our collective duty to lend responsibly, we will need a forensic understanding of product development in the future and of cases right now that were once considered more straightforward.

Understanding the consequences for individuals of periods of furlough, mortgage deferrals, or periods of low earnings, needs to be woven into our ability to understand borrowing requirements and the ability of borrowers to pay back the loan.

That’s why not over burdening borrowers is so important because as we have seen in other markets, mortgage prisoners still exist from the previous Global Financial Crisis.

Unemployment

The biggest obvious concern will be the level of unemployment as we emerge from the Covid-19 pandemic.

There is a very obvious correlation between earnings and an ability to repay and it is a factor all lenders will be watching carefully. Inevitably, any change in circumstance regardless of what it is and when it occurs results in uncertainty – especially for borrowers who rely upon a fixed income.

It is unemployment that not only affects the ability to repay but impacts an entire family’s fortune in all senses of the word.

This is why products such as our Joint Mortgage Sole Proprietor (JMSP) range are available to support people onto the property ladder, purchase a home later in life or borrow in changed circumstances by using the income of a family member to increase borrowing capacity.

This is not our only solution, but I firmly believe responsible lending will deliver innovative products that can support the real issues facing Intermediaries and their clients in the longer term.

By working together, we will be able to support brokers in their conversations with clients and offer the most appropriate products to give peace of mind that the right decisions are being made and ensure that our brokers can secure the outcomes that their clients deserve.

John Truswell is head of intermediary mortgages at Newcastle Building Society