A look back & a look forward to 2021

2020 started like any other year, mortgages were cheap and plentiful lenders were looking at ways to increase the amount they could lend and everything was good.

Fast forward until March and how things changed. The first 2 weeks of March for us were like any other, we were getting plenty of enquiries, applications were going in thick and fast and we were having our best year to date.

Then the lockdown came and the last 10 days of March we did very little.

April came and we sat in the back garden having BBQs and spending time with the family. I have to admit, putting aside the uncertainty of work, I enjoyed April. The sun was shining and I spent more time with my family than I would ordinarily have done.

But it was April where mortgage lenders started to pull back, lenders were cancelling applications, maximum LTVs were being lowered, rates were going up and it felt like we had gone back to around 2011 (not quite as bad as 2008, but not as good as 2019).

May and June carried on in a similar sort of fashion. Demand for mortgages started to pick up. It is difficult to put this down on a specific reason as everyone I spoke to was expected demand to fall off a cliff. I suppose being stuck in your home for 6 weeks will probably make you want to move!

As demand increased, mortgage lenders still had a lot of their employees on furlough, they also had to move staff to dealing with the payment holiday scheme the government set up and with the added complications of furlough and lenders being extra cautious, it meant applications were taking 2-3 times longer then normal. This also meant that lenders were not in any rush to reduce rates or increase LTVs etc.

The second half of 2020

Things kind of carried on in the same way, service levels were poor, LTVs were lower, criteria and credit scoring was tighter than it had been – this played out in our success stories, we were still getting some good applications through for complicated and adverse cases, but they were not quite the same as they were in 2019.

As we hit November/December, lenders were starting to get back on top of their service levels. Lenders who had previously pulled out were starting to come back and LTVs were on the increase again – we were getting more 90% products and the adverse lenders were opening their doors/increasing the LTVs to the 80/85% LTV mark again.

Rates are not back to where they were, certainly above the sort of 75% LTV mark, criteria is still tighter but there are definitely positive signs.

A look forward to 2021

I am not really sure. My thoughts (it will be interesting to revisit this in 12 months to see how far off I was) are:

  1. Rates will start to come down at the higher LTVs – My thinking there is service levels are now back in line, the vaccine is here and people have shown signs they want to get back to normal. The chancellor has already hinted at doing things to get people spending again so that should get the economy going again.
  2. The higher LTVs will be around, but I do not think we will see 95% products in the main until the back end of 2021 (if at all this year). There will probably be 95% products but they will be quite restrictive – maybe guarantor mortgages, or only for certain postcodes – similar to maybe 2013.
  3. Self employed applications will continue to be difficult. My thinking here is that lenders will want some reassurance self employed applicants businesses are back to normal and they were able to weather the storm. Tax and VAT bills will start to become due soon and so that could be enough to put some businesses under if they can not pay them or find ways to finance them.

I think 2022 will start the way 2020 started, but I think 2021 will be a bit of a rocky year as there are so many unknowns (brexit, the end of the stamp duty holiday, the changes to Help to Buy, whether the vaccine will work and will people go out and spend to get the economy going again).

I do not expect to be writing any records this year, but I know we were in a position to ride it out so come what may, we will be around to see how wrong I was on this post – Happy New Year and although it is unlikely to be much better than 2020, the end is in sight.