The COVID catalyst for complex

Craig McKinlay Kensington Mortgages

Craig McKinlay is new business director at Kensington Mortgages


The pandemic has forced us to adapt our behaviours in several areas of life. As restrictions and fiscal measures ease, it’s worthwhile taking a look back at how the pandemic has changed the housing market and what ‘complex’ now means in specialist lending.

The past year has seen a fundamental imbalance between increased demand and a decrease in mortgage supply. The government’s stamp duty tax break significantly boosted demand, reflected in many house price indices reporting record annual growth.

Increased demand placed a lot of stress on brokers when trying to place a case, particularly given that many lenders had either tightened their criteria, reduced loan-to-values (LTVs), or stopped lending all together. The reality of months stuck at home has also led many to reassess how and where they live.

A backlog was naturally going to form. June has been one of our busiest months on record so far. However, with the end of the stamp duty holiday and mortgage payment holidays, we expect to see the pendulum swing the other way and re-adjust, with lenders having increased capacity again.

Against this backdrop is the overlooked issue of complex lending. With the devastating impact that the crisis has had on many self-employed workers or small businesses, the pressure on specialist lenders who can account for these circumstances grows.

Brokers and lenders have not only had to adapt to changing guidance, stamp duty holidays and working from home, but also the influx of specialist cases. In this time, standard ‘rules’ have been insufficient to account for the challenges many have faced, and lenders have shown forbearance.

The introduction of Bounce Back Loans, government grants, and the furlough scheme was essential to keep the economy afloat and necessitated an equally important response from the industry. Most significantly, this meant flexibility towards lending criteria.

At Kensington, measures included accepting cases where businesses had employees on furlough at least three months prior self-employed workers on a government support scheme, or customers who have had a small blip on their credit profile within the last 12 months.

Supporting these individuals who have likely suffered a disproportionate impact due to the pandemic is responsible for business and beneficial to the economy. Helping those who may otherwise fall through the cracks broadens access to the housing market and keeps growth afloat.

This is not just a short-term, pandemic related area of lending, though. If anything, COVID-19 has acted as a catalyst for complex borrowing, creating a boom in cases which may otherwise have looked more like a steady trickle. The number of small businesses owners and self-employed in the UK was growing year-on-year before the pandemic – and is likely to climb steeper when the furlough scheme is wound down in the UK, currently scheduled for September 2021.

Adaptation and flexibility are therefore vital at all times, irrespective of the current circumstances. In a market where product criteria, pricing and affordability are constantly changing, clarity and efficiency are key for brokers. It’s also imperative to those with special circumstances. Getting the right information is key to ensuring they receive the right advice.

After a tough 18 months, the market is finally returning to something near normality. But any sense of normalisation cannot allow for complacency. This period may represent a vast change in broader working patterns, and COVID-19 will likely have both escalated the number of those with complex circumstances seeking mortgages, and expedited the number of those who have become self-employed and rely on specialist lending.

Despite the end of the stamp duty holiday and tapering government support schemes, it’s incumbent on brokers and lenders to continue to be aware of the rising number of customers with specialist mortgage needs and continue to serve them as well as they can. While the future is looking brighter, it will also be more complex.


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