Anyone who knows me will tell you I’m happy to share my opinions on pretty much anything, from Tottenham’s defence to the all-time-worst Star Wars film (got to be Phantom Menace, right?). But when I was asked if I’d like to write Second Charge Watch I was stumped.
I mean, what’s to say? Brexit – well, that was a bit of a damp squib. Then there’s this very serious Covid-19 pandemic, but apparently, according to lots of comment I’ve seen, for most people it’s ‘Business as usual’. All good, nothing to see here. I just want the football back on the TV.
Yeah, right. Anyone from the financial services industry who describes what they’re doing now as ‘Business as usual’ is either in denial or following a different guide to truth and transparency. Covid-19 has changed the game.
Let’s start with the worst. Above all else this is a tragedy on a grand scale. Whatever impacts this is having on the second charge industry, it’s nothing compared to the effects it is having on individuals and families, either suffering from or fighting this horrible disease and having their lives turned upside down by the measures in place to bring it under control. So let’s keep some perspective.
Industry-wise, the choice of second charge lenders has reduced drastically. Some, especially warehouse-funded lenders, withdrew quickly. Others took a bit longer to back out and the rest of us have had to take a good look at our criteria and make difficult decisions.
A few, UTB included, have left something on the table for brokers. Tighter underwriting and lower LTVs? Yes, of course, but we were transparent about that from the start and we are still lending to a lot of customers. Brokers will remember the way lenders have handled this crisis for years to come. Relationships have been tested and there will be a few break-ups, I’m sure.
Long-term recovery
The effects of the lockdown will be felt long after it is lifted and, in all likelihood, some staff may never go back to their old job – some probably won’t want to. Recovery will take well into next year and maybe even longer. Some brokers and lenders may not make it back at all.
Some experts suggest unemployment could double, defaults could rocket, payment holidays will stretch lender reserves and household incomes could be hit again. It’s not easy to look on the bright side, but let’s try.
Technology has played a massive part in enabling UTB and other lenders to keep lending. Without our investment in smart fintech solutions such as the UTB Nivo App, we would have struggled to operate at anything like the level we are.
Although our volumes are down by about 30 per cent, we estimate our share of the market is up about 300 per cent, so that gives you an idea of how much brokers are relying on a limited number of lenders right now. Lenders need brokers as much as brokers need lenders. It doesn’t matter how great our products are if there’s no one left to help consumers make the right choices. It’s become the Covid-19 cliché, but we are all in this together.
Around 90 per cent of UTB staff are working remotely on any given weekday and in the mortgage team we need only one person in the office every other day.
It’s a similar picture at many brokers too. We’re paperless now and, although it’s not exactly how I want the journey to be, with a little finessing it’s going to be really slick. Our customers can verify their ID at home in about 90 seconds and automated valuation models mean we don’t need physical valuations for many cases. Some of the changes we’ve made we’ve wanted to do for ages, but the day-to-day demands took precedence. It’s amazing how quickly things can be done given the right motivation.
Zoom meetings have become the norm. I used to hate video conferencing and would be quite disappointed by people who wanted to meet that way rather than travel to meet in person. Now I’m a Zoom convert and imagine I’ll still do quite a few online meetings when this crisis is over.
The coronavirus crisis has been awful for lots of people. No one will look back on this period fondly. But some things will have changed for a long time after the lockdown is lifted. The smarter use of technology, the better use of time, the value of strong professional relationships, and a greater appreciation of the things we sometimes take for granted, such as family, friends and a quick pint in the pub with your colleagues before catching the train home.
Buster Tolfree is commercial director – mortgages at United Trust Bank
