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Mortgage market update – July 2020

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Managing Director for Mortgages, Richard Rowntree, provides an update on the mortgage market in the wake of the COVID19 crisis.

With numbers of new COVID19 cases now drastically reduced, many of the measures put in place to keep us safe have been relaxed. A reduced risk to health means the focus has shifted to minimising the negative impact on the economy.

The Government seem to be taking a “whatever it takes” approach to avoid what started as a health crisis becoming an economic one; the global financial crisis casts a long shadow but as a result banks are better prepared - well capitalised and more stringently governed. And greater governance is a good thing, the regulators are in place to protect consumers and that protects the mortgage industry and wider economy.

At the start of June, the FCA confirmed the support firms should give to mortgage customers who were either approaching the end of a payment holiday or who were yet to request one. I expect the majority of those coming to the end of mortgage payment holidays issued at the start of the crisis to capitalise the deferred payments, with lenders ready to support with a range of options. This includes the extension to payment deferral after the FCA’s extension of the window to do so until 31st October.

Despite the best efforts of policymakers, the economy clearly won’t come through the crisis without some scarring. History, however, has shown us that downturns are often temporary, so it is sensible to take a long-term view. It seems that some landlords are starting to do just this.

When asked by BVA BDRC ‘Which of the following statements best reflect your current expectations as a landlord looking forward to the end of the Covid-19 crisis?’ the overwhelming majority of respondents were generally positive about their prospects.

Although it would be insensitive to play-down the financial hardship that will undoubtably be endured by some, there are signs that, like banks, some landlords are better prepared as a result of the 2008 global financial crisis. They are not as highly geared and benefitting from historically low interest rates, some landlords will be looking to respond to rental demand and spotting trends in changing expectations from tenants.

These may be brought about by a range of different scenarios. Our Mortgage Sales Director Moray Hulme has looked at some of these in his article ‘COVID19: How has it affected demand for rented property?’.

Although it is too soon to say how things will pan out with any certainty, the signs suggest that the market is moving in the right direction. By keeping in touch with the changing and varied needs of customers, the property industry can supply places we’re happy to call home and play a key role in restoring the UK economy in the process.

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Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551