STAMP DUTY HOLIDAY DEADLINE
The Importance of Building Societies in a Post-COVID World
By Richard Groom, Head of Mortgage Sales
While many are looking back over 2020 and the impact this has had on the market, at the Tipton we are looking forward. As the UK comes out of lockdown and we return to ‘normal’, it is important to note that the effects the last fifteen months is likely to have on the market and borrowers going forward. Following months of uncertainty there will be more borrowers needing a personalised approach to their mortgage applications and regional building societies are in the best position to support this.
Unlike high street lenders, many regional building societies do not operate a computer decision making system dependent on a borrower’s credit score. Instead, they can offer a wider range of flexibility to borrowers through manual underwriting processes. These processes can mean we ask a couple more questions, however the personalised manner of underwriting allows for each application to be assessed on its individual merits. This could prove imperative for borrower’s who have been temporarily impacted by the pandemic. Where societies can take a view on the personal situation of each borrower and assess risk on a personalised basis, there is much more potential to support those who have seen a temporary change in circumstances due to the pandemic.
“More than 11 million jobs have been furloughed in the UK since the beginning of the scheme.”
This is key to the underwriting and affordability process, meaning the manual stance that many building societies still offer can allow flexibility in this area. As a result there are a number of societies who will consider applications from borrowers who are currently on the furlough scheme. At the Tipton, applications from furloughed clients will be considered, providing there is a return to work date set and income can be revalidated prior to completion.
Regional building societies are also known for their niche criteria and mortgage propositions. From zero-hour contracts, to accepting clients in probationary periods and specific self-employed applicant criteria, this approach is likely to prove valuable in the initial stages of a post-COVID world. While borrowers work hard to adapt into the demands again called on from their professions, building societies will need to do the same.
Prior to and during the pandemic, societies have been known to be faster to enter new markets and niche areas of lending. A great example is the Tipton’s reaction to high LTV products being withdrawn from sale throughout 2020. The Society quickly reacted to launch a flexible loan to value Family Assist proposition, offering lending up to 99% LTV, whilst continuing to offer their standard 100% LTV Family Assist product. These fast reactions are tribute to the role societies play in the market going forward, where answering the needs of borrowers must be at the front of all minds.
So, over the coming months and years, it will be important for advisers and lenders alike to look beyond the headline rate and work together to understand the changing needs of our customer and provide a lending solution that works to support your business and the market as a whole. Something building societies continue to embrace.