For the households that have managed to weather this initial storm and are ready to come off of their payment breaks, the next step will be to put a plan in place to start repaying their outstanding capital. For others, however, further support from lenders could still be necessary.
With the Government’s Job Retention Scheme coming to an end in October, it’s likely that many of the 9.6 million workers who are currently still on furlough will require further assistance from lenders over the coming months. As the Covid-19 crisis continues to impact businesses across the country, a significant proportion of furloughed workers, particularly those in the hardest hit industries, could even face unemployment come November. In turn, this could cause many to approach their lender for support as they face further financial hardship.
While this additional support will be vital for many borrowers to help them manage in the short-term, the harsh reality is that this could be detrimental to their long-term financial position and, subsequently, their likelihood of securing a mainstream mortgage later on. In August, the regulator confirmed that borrowers who require further support from lenders beyond October will have this reflected on their credit files, regardless of whether this is in the form of another payment holiday or an alternative solution.
Even homeowners who do not require support beyond October may find that they are not eligible for a high-street loan in the future, regardless of whether their credit file has been affected or not.
Specialist lenders, however, could provide these individuals with a financial lifeline in future. Indeed, as borrowers navigate the fallout of payment holidays and the furlough scheme, it is likely that the specialist market will be met with greater demand from customers looking for affordable financing. To this end, it is vital that lenders use this time to gear up for the long-term opportunities.
Get brokers on your side
A recent surge in applications at Bluestone has given us a flavour of what a post-coronavirus market could look like. Application volumes spiked by over two-thirds (68%) during September compared to the same month last year – marking an all-time record month for Bluestone. Once payment holidays and furlough come to an end, however, application volumes across the wider specialist market could be significantly higher – and it is vital that lenders are geared up to meet the heightened demand from consumers.
This is where lenders will need to prioritise supporting their brokers. One way of doing so will be to invest in the development of dedicated support teams to ensure that advisers are equipped with the tools and resources they need to serve growing demand from customers. Another way of achieving this will be to encourage new advisers to tap into the specialist market and secure the help of Business Development Managers (BDMs) and Key Account Managers (KAMs) to engage existing advisers. This way, specialist lenders will better ensure that the broker community is geared up to support a growing number of “non-vanilla” customers.
Innovate to stay on top
Product innovation will also be key to ensuring the future success of the specialist market. As the complexities and intricacies of borrowers’ needs unravel in the wake of the crisis, customers will need greater flexibility and choice when it comes to tailored financing. As such, specialist lenders will need to create products which fit the varying demands of these individuals so they can improve their overall financial position and, ultimately, boost their future lending prospects. Keeping in contact with intermediaries about customer feedback and feeding this into the future development of products will be an effective way of achieving this.
Embrace technology
Technology is set to play an increasingly important part in shaping the future of the specialist market and promises to ensure that lenders can respond to customer demand effectively over the long-term. Looking ahead to a post-coronavirus market, there could be an opportunity for specialist lenders to work with technology developers and create platforms that help improve outcomes for end-customers, particularly those impacted by Covid-19. For instance, the development of Open Banking could accelerate post-crisis as more lenders realise the benefits that this type of technology brings for both their business and outcomes for borrowers.
While the decisions many borrowers currently face are set to impact them in the long-term, specialist lenders will be on hand to support these individuals in the future – but only if they prepare for what’s to come. There are numerous opportunities to be taken, and if specialist lenders are to capitalise on these, innovation and investment in the necessary areas will be key. Ultimately, this will ensure they can best serve the millions of borrowers who have been impacted by the Covid-19 crisis later down the line.
Steve Seal, MD of Bluestone Mortgages
