Britain has been enjoying something of an Indian summer over the last few days, but while we can probably expect the high temperatures to wane next week, the activity we are seeing in the mortgage market is an altogether different story.

These are fascinating times for the sector – demand is there and, in an effort, to protect capacity, lenders are proactively tweaking rates. On average, mortgage rates on two- and five-year fixes have crept up by 0.16 per cent and 0.15 per cent respectively between August and September. There has scarcely been a better time to write good margin business for lenders.

At any other time, we would see lenders and new products flooding the market to equalise the supply and demand curve and add competitive pressure to the rate environment. But in our strange, new normal that isn’t happening.

While it’s true that more lenders have returned to the market in recent weeks, including Vida and Atom Bank, and this has helped to increase product availability, high LTV options remain few and far between.

No way back

There is a clear need to address this problem. Lenders have rarely been as stressed from an operational perspective as they are now. The challenges they are facing are understandable, but we need to find ways to improve the mortgage journey.

Technology has been nibbling at our industry for well over a decade. Covid has changed what was a slow-burning, evolutionary approach to the adoption of technology into a revolution. One lender I spoke with recently described the crisis as a huge leap forward in embracing new processes and technology, providing a boost that has moved us years ahead of our previous timeline. Yet, technology has still not struck at the very core of the main processes in the mortgage market.

When I first became director of Legal & General Mortgage Club, I spoke about creating a seamless mortgage journey and the valuable role technology can play in this. We’ve made key steps with tools such as SmartrCriteria, but a greater focus on technology remains a real ambition.

However, I am already seeing and hearing of instances where the industry is slipping back into old ways. We need to retain the momentum that has been afforded to us by this crisis. We cannot go back. Consumers will have little understanding or sympathy with us if we can’t help them achieve their housing ambitions.

Solutions for today’s challenges

Invariably, we are being given a Hobson’s choice. Slow service or higher prices, tighter lending criteria or tranche management systems, web chat or telephony – which is the least bad option for advisers?

Following my conversations with advisers, a number of common requests of lenders emerge.

Communication is critical. Simply sending out one communication to tick the box and say ‘done’ is of no use to advisers. There are hundreds of criteria changes taking place currently. Advisers need to be able to keep track of these. And, please, give advisers a warning before products are pulled.

Lenders need to be open. If a limited distribution is about to occur, we need lenders to be clear and to let us know why. If turning off the phone lines to advisers and setting up a web chat is the only way forward, tell us why. And if it means keeping a high-LTV product for a few more days as a compromise – let us know. Doing so will engender more support for lenders.

The market is incredibly busy and in many cases a mortgage needs to be approved quickly. This has meant packaging quality is perhaps not where it should be, creating extra work and frustration. We must try to retain high standards. However, with healthy margins and efficiency gains from getting it right first time, could there be room for incentives for advisers who continue to package well?

We’re also yet to find a solution to the challenges posed by tranche management. When a great product is appearing on sourcing systems, but is actually unavailable, managing customer expectations becomes difficult.

Nobody wants to be seen to be ungrateful, however. We recognise those lenders that have been working hard to try and provide solutions, particularly at higher LTVs.

This is a clearly great time for lenders to increase their portfolio with well-funded, well underwritten and lower risk new customers. It’s in everyone’s interest to find solutions to operational issues quickly. The current consumer demand spike cannot last forever.

Kevin Roberts, Director, Legal & General Mortgage Club