Private Finance Weekly Mortgage Memo - 27th April 2020
This is our summary of news in the mortgage market over the last
week that we thought was particularly interesting. Our views are often cited in
several national publications, including; BBC News, The Times, Telegraph, City AM, FT
Adviser and Daily Mail, as well as a number of key trade publications, so this
should keep you ahead of the curve. If you have any questions on any of these
stories, or would like further information, please do not hesitate to get in
At a glance:
- Offer times outperform pre-COVID levels in some cases
- Revolution in action – new normal for mortgage valuations
- Almost 5 million mortgage loans on Standard Variable Rate (SVR) – costing wealthy owners ten of thousands of pounds
Offer times outperform pre-COVID levels in some cases
Last week, lenders worked fast. Clients generally receive mortgage offers within 2 weeks. That time frame has been slashed in some cases. Several of our clients last week have received offers within 2-3 days (not a typo). For example, one client’s mortgage was declined direct with their bank for a purchase and they needed to complete extremely quickly. We worked with a lender who had short processing times and could do an online valuation and the offer was ready in two days. This will allow him to complete in under 2 weeks as the legal work is already well underway. That would be a slick turnaround even without the added pressures of COVID-19.
- “Processing resource issues” are already a thing of the past. Now lenders have so few new purchases to deal with, they have capacity to get new cases processed quickly.
- Lenders and valuers have proved willing and able to adapt to life under lockdown. This bodes well for a potential second or third wave of infection / more lockdowns.
Revolution in action – new normal for mortgage valuations
Valuers are using desktop valuations more often (i.e. undertaking research to value properties without physically visiting them). They are working surprisingly well.
- Mortgage valuation is set for a gale of creative destruction. Covid-19 has demonstrated virtual valuations are viable – that they can be undertaken at scale. Some mainstream lenders are prepared to lend at 85-90% loan-to-value (LTV) via desktop valuations now. The adoption of desktop valuations will only become more widespread. Now some BTL lenders are proving resilient and are on board. Where data is available online valuations will be used in all but the most complex circumstances – HMOs and multi-unit blocks, too, eventually. The valuation industry will not go back to business as usual. This is the new normal. Schumpeter would be proud…
- This will speed up the mortgage process, saving borrowers time. It will save them money, too.
- Crafty mortgage companies will soon start pitching this as a step taken to make their businesses greener – desktop valuations are more environmentally sustainable after all.
Almost 5 million mortgage loans on Standard Variable Rate (SVR)
Despite the recent uptick on remortgage activity, 4,750,000 mortgage borrowers are still on an SVR – the default mortgage people fall into when their initial mortgage deal ends (Experian: 44% of the UKs mortgages are on an SVR).
- SVRs are currently more than double the fixed or discounted rates on offer at the time of application. This will be costing mortgage holders thousands, if not tens of thousands of pounds in extra interest and could be heavily affecting those that need financial relief most right now without them realising. With rates at historic lows, now is the time to remortgage. If used correctly, mortgages, rather than being a burden, can be a valuable financial planning tool.