Such is the inter-related nature of the housing and mortgage markets, that it’s inevitable that a pressure felt in one area will have consequences across multiple others.
It’s our own market’s take on the butterfly effect. In other words, what happens – particularly within lender operations – has acute and either positive or negative impacts on all our businesses.
So, what are we to make of the big lender-based themes at present and what might they mean for us?
Certainly, I think most lenders would agree that 2020 turned out far better than they could have imagined back in the depths of March through mid-May last year.
By and large, targets were not just hit but surpassed, and this has led to increased lending targets for 2021.
At the same time, there appears to be a real focus on cost. To which you might respond, ‘Hasn’t there always?’ And, of course, the answer is yes.
At every single business there should always be a watchful eye kept on costs, but specifically for the major lenders at present, and notably for those who operate through both direct and intermediary channels, that focus on cost is all-encompassing and has been for some time.
In a way therefore 2021 will be no different in that regard, but that focus on cost is all about introducing enough measures to continue bringing those costs down.
For advisers this might be perhaps most relevant in terms of lender contacts, notably BDMs.
One would suspect you’ve seen some of your regular BDM contacts ‘disappear’ recently, or perhaps more positively, working from the office (or home office) based roles.
Clearly, BDMs can’t be out on the road at the moment, and I suspect a large number of lenders are reappraising what they will need in the future, given that it’s likely face-to-face meeting requirements will drop, especially when you can utilise Zoom or Teams.
I would also guess that lenders are increasingly looking at middle-manager type roles within their businesses and wondering just how many might be required.
Of course, it’s not only in terms of human resources where lenders might want to keep costs down, but in the third-party services they utilise, the way they interact with customers, the technology systems that drive the business.
Believe me, I worked for over two decades in lenders and there will be widespread scrutiny across all cost centres, it’s why, for instance, we’ve seen a steady decline in the number of branches as more banking goes online. That will continue.
As a provider of surveying and valuation services to the lending community, we of course have to be acutely aware of that ongoing squeeze on costs and what it is likely to mean in terms of what lenders want from us in the future.
It means, and this is clearly important for advisers and their clients as well, that in the future we’re likely to see a growing demand for desktop and automatic valuations as opposed to physical ones.
Different, and cheaper, valuation models are already in demand, and in a sense, 2020 did provide a number of lenders with something of a trial run, given that physical valuations were out of the question during the first lockdown, and the only way cases could be progressed was through a desktop product.
Now, whether the desktop valuation products used last year to get us through lockdown, are going to be sufficient to move us into this new future, is a moot point.
Our own feeling is most definitely not. Indeed, the quick return to the vast majority of valuations being physical again, as soon as lockdown ended, will perhaps tell you all you need to know there.
However, that is unlikely to stop lenders wanting the option and wanting a much more robust desktop product to utilise far more in the future.
Desktop valuations are higher risk than physical for obvious reasons but lenders will want to work with surveyors who can bring that gap down.
The market is moving in that direction and we have also been working on a new product to support that lender need.
There are, of course, challenges in all of this.
We’ve had our robust desktop valuation process approved by our PI underwriter, and individual surveyors, and firms will need to have a specific conversation with theirs if they want to carry out desktops.
However, it does seem inevitable that lenders will want to move towards desktop valuations for a much larger number of cases in order to keep those costs down.
In a very true sense, the butterfly is beating its wings across the vast majority of lenders and we all have to be prepared for the impact this will inevitably have on our businesses, the people who work for us, and the customers we serve.
