With the number of COVID-19 cases now in decline, the UK is now on a mission to recuperate the economic losses incurred as a result of the pandemic. The initial outbreak of COVID-19, and ensuing national lockdown, meant many industries essentially froze operations, stagnating the nation’s economic growth and leaving those in the middle of property transactions out in the cold.

The British Government has made numerous policy interventions to try and facilitate a strong, quick, economic recovery – the most pronounced of which being the stamp duty land tax (SDLT) holiday. This tax break on the first £500,000 of all property transactions across England and Northern Ireland has been effective in attracting buyers back to this all-important sector of the economy; however, without prospective buyers having proper access to the financing necessary to complete on transactions, this policy’s success will be limited.

The lending industry, therefore, will play a massive role in the upcoming post-pandemic UK economic recovery. However, COVID-19 has brought about some substantial changes to the lending industry throughout 2020. For the sake of lenders, borrowers, and their clients; I’ve listed three of the biggest developments I’ve seen in the lending industry this year, highlighting where change needs to occur if this sector wishes to properly take part in the UK’s economic recovery.

Traditional lenders have become risk averse

A recent development in the lending industry has been the apparent rejection of loan applications when the applicant has partaken in the mortgage repayment holiday scheme implemented in March. This is happening despite multiple assurances by the Financial Conduct Authority that one’s inclusion in this scheme wouldn’t impact one’s credit score or ability to secure future loans.

Of course, it does make sense for high street banks and traditional lenders to consider whether an applicant’s inability to make mortgage payments as a result of COVID-19 will affect their capacity to take on more debt. However, it is important for lenders to appreciate and understand the challenges COVID-19 has posed and adapt accordingly. This can partly explain why brokers and borrowers are turning to lenders who are flexible and accommodating to each individual case, such as bridging lenders.

Consolidation of the specialist finance sector

In the years leading up to the COVID-19 pandemic, the number of specialist financing firms was rising at a substantial rate. As more and more brokers became aware of the benefits that a specialised, agile loaning firm could provide, demand for said firms began rising.

When the pandemic hit, many new lenders struggled to adapt to the new economic reality. Established lenders which had previously survived global crises, conversely, managed the weather the storm through their strong service offerings and solid client-broker relationships. These later firms, in which I include Market Financial Solutions, quickly became the only avenue for property transaction financing when traditional lenders withdrew from the market at the height of lockdown.

These two factors led to partial consolidation of the specialist finance industry; where the firms that survived and assisted with the few transactions that were completed on during lockdown were now able to enjoy this new-found appreciation for their services from brokers and borrowers alike.

A competitive market

A new priority for prospective buyers when it comes to choosing which lender to pursue a mortgage application with is speed and efficiency.

This is the result of the current financial volatility in the market. The first Nationwide house price index released following the SDLT holiday’s implementation showed a rise in annual general UK house prices of 1.5%, following a 0.1% decline the previous month.

Given this wide variation of house prices, buyers will be keen on closing transactions as quickly as they can. This becomes an even bigger worry when we consider that the SDLT holiday ends on March 31st, 2021. I anticipate a flurry of activity in the weeks leading up to this date next year, as domestic and international buyers look to take advantage of the holiday before it expires.

The question becomes, then, whether the lending industry is capable of recognising the developments listed above and making the necessary changes. New processes and a shift in attitude are needed if this sector is to play a key part in the UK’s post-pandemic economic recovery. If nothing is done, then we risk a loss of faith in the lending industry and a potential limiting of the success the SLDT holiday can bring.

However, having seen the remarkable things this sector has accomplished in the past, I’m confident that firms and brokers will act diligently in the coming months. With the proper preparations, attitude, and mindset, the lending industry can ensure it is playing its part in bringing about the UK’s economic recovery from the pandemic.

Tiba Raja is the Director of Market Financial Solutions – an independent bridging finance provider that arranges fast and flexible bridging to intermediaries

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