Nick Lawler, Head of Business Development for DPR, looks at the recent challenges presented by COVID-19 and how banking technology is helping to keep the mortgage market moving. This article was published in The Building Societies Association blog, May 2020.
Like the rest of the world, the lending sector is trying to come to terms with the Coronavirus pandemic and working to mitigate the impact on the economy including the lenders, brokers and consumers that work within it.
The government has been quick to act. Residential and buy-to-let mortgage borrowers impacted by Covid-19 who find they cannot make their mortgage payments will be allowed a payment holiday of three months. Customers with personal loans and credit card borrowers who face difficulties with their finances will also be able to ask for assistance if needed.
While help has been offered, the impact will still be far-reaching. As numerous new and existing residential and buy-to-let customers have seen a change in their income, some pre- and post-offer mortgage applications will not be completed due to new affordability calculations. Those individuals finding themselves on the government’s coronavirus job retention scheme or furloughed will be affected with lenders setting their own income and evidence requirement criteria.
With the government urging people to delay or not begin the process of buying or selling a home, self-distancing restrictions put in place have stopped almost all in-person valuations. This has seen an increase in the use of alternative valuation methods, such as automated and desktop options in order to carry out as many valuations as possible and ensure ongoing applications can continue to be progressed.
The recent base rate changes would normally bring heightened activity and increased competition to the mortgage product sector, however, the last few weeks has seen huge numbers of product withdrawals.
Moneyfacts research reported that as between 11 March and 6 April, a total of 2,471 mortgage products were withdrawn from the market. In addition, results from Knowledge Bank’s Covid-19 live feed of lender criteria changes on 3 April highlighted almost 3,000 additions and changes to criteria in the previous two-week period.
Homeowners will likely review their finances and look to cut expenditure where possible, meaning that remortgage and rate review business is likely to continue and potentially increase. As a result, lenders will need to try and increase the scope of AVM and desktop valuations, usually restricted to lower percentage borrowing, to more conventional property types.
The need to provide automated responses and decisions to help manage these numerous changes has never been greater. Existing established technology platforms can meet these needs, problem-solve and help deliver better products and services. However, now more than ever it is important to not lose sight of the fact that banking is still about customers as well as money. Banking technology platform providers allow lenders to free up valuable time to assist customers requiring assistance with more urgent matters such as arranging payment holidays.
It is difficult to see past the current problems caused by the Coronavirus pandemic and the range of steps being taken to combat it. However, the increasing use of, and reliance on, financial technology will remain. Providing improvements to pricing, risk assessment and management, distribution strategies, and customer experience powered by a well-designed integrated digital platform will enable clients to work through these unprecedented times.