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Insights

Looking back on 2020

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As 2021 gets underway, our Mortgages Managing Director, Richard Rowntree, takes a look back at the last 12 months and reflects on the challenges of 2020 and the lessons we’ve learned.  

Although I’m sure we will all be glad when it is old news, it is difficult to look back at 2020 without talking about Covid-19.  

Although lockdown meant that many of the different components of the property market could not operate as normal, the industry responded rapidly to help customers navigate through unchartered territory and minimise any negative impact on businesses and the wider economy.  

At Paragon, within four days, 90% of our staff were working from the safety of home, with almost all aspects of working life done virtually. This efficient mobilisation was possible because of recent investment in our IT infrastructure and the amazing efforts from our teams. It highlights a number of positives that we can take from the year.  

The first is the most important but something that may fall victim to our busy lives. It is the increased emphasis placed on the physical and mental wellbeing of our friends, family, colleagues and society as a whole. While there have been examples of selfish and unkind acts, many born out of fear and misinformation, the pandemic has brought out the best in many of us.  

I have read many accounts of landlords supporting tenants, picking up the financial or time cost in a challenge to their poor stereotype. More widely, we have a new-found appreciation of those who quietly keep essential services such as shops, schools and hospitals working. Being kept apart has reminded us how important it is to be together and platforms like Zoom have become essential tools professionally and personally.  

However, if we’re honest, we don’t always like change. It presents risk that sometimes can be perceived to outweigh the reward, but this balance was changed by Covid-19. The risk of not changing was clear to see; the situation we found ourselves in forced firms to adapt or die. While some have unfortunately failed, many will come out of the other side stronger, made more efficient through a necessary adoption of technology and an awareness of what we used to do which we didn’t really need to. 

That’s not to say that we didn’t put a foot wrong, there are definitely lessons to be learned across ours and other sectors.  

Being in a totally novel situation and forced to act on limited information inevitably lead to decisions that may be different with the benefit of hindsight. Asking intermediaries about their experience of lenders throughout the pandemic, it seems that firms were so busy keeping in check with fast moving industry rules that they neglected clearly communicating them.  

While ensuring people were available at the end of the phone meant we fared better than some others in aspects of broker feedback, we know we can improve using the momentum we’ve gained with technology to further digitise our processes and facilitate self-service. 

It wasn’t just service issues that frustrated brokers, widespread economic uncertainty resulted in tightened criteria and reduced product availability. Brokers know how lenders work and I imagine many have been around long enough to remember the financial crisis in 2008 so understood the need for lenders to manage risk and lend responsibly to protect customers, but it was difficult for them to keep abreast of almost daily changes.  

There is a benefit to being able to adapt but there is also a time that calls for consistency. 

Using student lets as an example, we opted for a more measured approach that saw us withdraw our offering as uncertainty surrounded the status of face-to-face study, returning only when we had confidence in demand. Admittedly, this means fewer products are available but at least brokers know our stance.   

In addition to our risk appetite, the new business we’ve taken on has been influenced by our ability to process it efficiently. Even with the efforts of staff working from home, capacity across all sections of the industry has been limited; as the 31 March deadline approaches, there have been increasing reports of delays in processing applications in local authorities and conveyancing firms as more people look to take advantage of the Stamp Duty holiday. 

Introduced as part of the Chancellor’s Summer Statement, the tax break has certainly stimulated the property market, boosting activity just as any demand pent up during lockdown started to wane. Various figures from within the industry called for an extension to avoid a cliff edge that many fear will see a dramatic downturn in sales in quarter two of 2021.  

While there is no denying that 2020 has been a real challenge for the sector, Covid-19 may have accelerated its professionalisation, something that the Government has sought to do with increasing regulation since midway through the last decade.  

When surveyed, just under a quarter of landlords who own a single property indicated that Covid-19 will likely result in them exiting the PRS. Amongst landlords operating 20 or more properties, this drops to less than one in twenty.  

It remains to be seen if we will be left with a higher proportion of professional landlords, something evidence suggests leads to higher standards, but either way, I think we will still see ample demand irrespective of employment levels.  

People will always need somewhere to live and economic uncertainty can cause some to put their homebuying aspirations on hold, instead opting for the flexibility offered by renting until the storm blows over. We have also seen a correlation between rising rates of unemployment and the numbers of those in higher education. 

These shorter-term determinants of market performance should also be viewed against a backdrop of societal and demographic changes that correspond with an increased propensity to rent such as an ageing population and growing number of single person households. 

When we’re faced with a very real and immediate threat, such as a global health crisis, it can be difficult to see the bigger picture but taking time to reflect, we see some good and that we can learn from tough times. With a vaccine now being rolled out with more versions on the way, there is a real sense of hope that the tough times won’t last forever.