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‘Mortgage lenders could pull out of the market’

Niche Advice director Payam Azadi is concerned that the economic shock caused by coronavirus could force some lenders out of the market.

Azadi is worried that non-bank lenders and specialist players could struggle with their funding lines in the weeks and months ahead.

The London broker said: “A lot of the lenders that rely on securitisations and the money markets are going to find it hard.

“Will these dry up? We’ve seen a battering of the stock market.

“The more dynamic and entrepreneurial businesses are under pressure because of the way they are funded.

“Institutions like big banks will do alright because they are backed up, well-funded and have strong balance sheets – they will weather the storm and see competition diminish.”

Azadi compared the situation to the outbreak of the global financial crisis of 2008, when some lenders reliant on securitisations went bust and exited the market because they couldn’t access their funds.

Azadi has seen many of his clients put proposed deals on hold due to the virus.

He is seeing a lot of enquiries from people looking to remortgage or consolidate debt – with measures like switching from a repayment mortgage to interest-only – to ensure they have a financial cushion in these difficult times.

However some landlords are looking at the situation as an opportunity to add to their portfolios, by purchasing a property at a competitive price.

Another broker, Aaron Strutt, product and communications manager at Trinity Financial Group, said he is continuing to help those who want to refinance.

He said: “While the main priority for people is their health during these difficult times it is important to reduce costs if possible.

“Mortgages are a big expense so if borrowers are about to switch to an expensive standard variable rate they should take action and swap to a better deal.

“We had a very busy start to the year and the market has slowed but we are still taking new enquires and will be helping our clients to remortgage.”

Despite both brokers speaking positively about borrowers wishing to refinance, they expressed disappointment that fixed rated mortgages haven’t cheapened after the Bank of England cut the base rate by 0.50% to 0.25% last week.

They added that some mortgage lenders are pulling tracker rates rather than reducing them.

Saffron Building Society pulled its buy-to-let range yesterday, though the lender indicated that it would re-enter the market later in the year.