December has traditionally been a somewhat odd month in the mortgage market – a mixture of both feast and famine as purchase clients seeks to complete and get into their new homes before the holiday season kicks off, alongside the other side of the market where everyone else is increasingly demob happy as the month progresses.
2020 is somewhat different in that, of course, we still have large numbers wanting to make that pre-Christmas completion, but we also have a far greater demand for mortgages in order to purchase prior to the stamp duty holiday finishing next March, plus we have a significant amount of rebroking business available in the form of remortgage and product transfer cases.
Certainly, from what we are seeing in terms of client usage of Credit Assess through December in order to get clients’ full credit report and Open Banking data, there are plenty of cases being worked on and no discernible drop in activity from the past few months, which I’m sure have been completely hectic for most advisers.
And, in another sense, while business in December hasn’t historically told us much about how the next 12 months might progress and the trends that are likely to dominate, this month seems different. Indeed, there are some notable signs of how the future might play out.
The recent ‘most-searched for’ criteria terms data that Knowledge Bank put out monthly is perhaps one of the clearest indicators of how the market is shifting, what advisers are looking at, and therefore the type of clients they are increasingly seeing.
So, it’s interesting to see two new ‘searched for’ terms making it into the top five, those being ‘furloughed workers’ and ‘soft footprint at DIP stage’. That latter term hasn’t bee in the top five for over a year, and searches for the former have surged since the government announced it would be extending the job support scheme back in November.
This seems to truly reflect the future for mortgage advisers because, it seems inevitable that the number of clients who have experienced a very different financial and employment situation throughout 2020 will continue to rise, and that their journey to mortgage finance is going to be far changed from what it might have been in the years previously.
Only wanting to leave a soft footprint at DIP stage, suggests advisers are currently feeling the need to try multiple lender avenues for their clients, which in turn would suggest perhaps a lack of certainty in the client’s financials and how they might be received by lenders.
This looks likely to be a growing challenge for advisers because a far greater number of clients may now come with particularly complex circumstances – were they furloughed during 2020; how did that impact income; for how long did they go through this period; is their income back to normal; did they take out a mortgage payment holiday; if so, for how long; did they take out three or six months and, if so, why; how much did their income fall over the period; if they are self-employed what was their income like through 2020; did they miss payments on credit cards or other debts; for how long; the list goes on.
Lenders are going to want to know all of the above and so much more, and of course, in order to make a breakthrough for these clients, advisers are going to need to know as much of this upfront. How can you even begin to work out which lender might be willing to look at such clients, and where they might fit, without that full credit, outgoings/incomings data, banking detail transparency?
Can you rely on the client’s memory or understanding of their situation? Given the nature of 2020 who wouldn’t forgive a client for inadvertently missing a credit or store card payment, a mobile phone bill, etc. They may have little idea of how this is registered on their credit report, and despite all the talk about mortgage payment holidays and how they wouldn’t appear on credit files, we all know that this is a long way from the reality of lenders, of course, having to take these facts into account when they make their lending decisions.
The mortgage world has just upped its level of complexity by a considerable margin, and while this is clearly good news for advisers in terms of demand for advice, it means they are having to sing far more loudly for their supper when it comes to securing mortgages, particularly for those who have had a turbulent 2020 financial-wise.
In that sense, 2021 is likely to look a lot like December 2020. Advisers having to walk a careful line and, from the outset, needing to have clarity about their client’s financials. Without that it’s so difficult to move forward and is likely to result in considerable frustration for all. Getting that information up front has never been more important, and that’s a trend which isn’t going to change.
