The year 2020 was a turbulent year for a lot of mainstream lenders. The result of the covid pandemic meant that individuals and businesses could claim furlough for their staff or use bounce back schemes to stay on top of their cash flow.
However, this meant fewer loans could be issued by mainstream lenders, who employ thousands of staff across the UK, Scotland and Wales and pay suppliers who assist with loan applications such as underwriting, credit checking, software management, payments and more.
David Beard, the founder of Lending Expert commented:
"All types of loans are likely to make a comeback in 2021 or at least start lending at 25% or 30% capacity. The previous year was very challenging with covid, furlough and unpredictable incomes which meant that lenders were unable to grant loans as normal. But things are starting to settle and now lenders have a much better indication of their lending risk and they are more equipped for 2021."
"Whilst the property market remains open and valuations are still able to take place, we will see more deal completions in the mortgage and second charge loans industry, with some trying to maximise completions before the end of the stamp duty cut off at the end of March."
Forecasting customer income and employment has proven challenging
One of the biggest challenges for lenders has been confirming the income and employment of their potential borrowers. Given the uncertainty, it has been hard for lenders to verify whether an individual would still receive their expected income in the next 3,6 or 12 months - something that is crucial when deciding how much an individual can borrow and whether or not they can be accepted for a loan, whether it is a personal, short term or business loan.
Loans against assets offer more stability
However, Beard highlights the role of second charge lending, which is secured against fixed properties and assets and assuming the value of the UK property market does not charge too dramatically, there will be continued stability in this area. This will mean continued employment and optimism for mortgage brokers, surveyors, estate agents and all the businesses involved in selling property.
They need to lend out money to keep staff employed
Granting loans is essential for lenders to continue to operate and all the jobs that come with it, including customer service, underwriters and also marketing. But as Beard explains, the UK’s larger lenders now have a better idea of their risk and lending profile and should continue to recover this year, even if it means they are lending at a fraction of their regular capacity.
Whilst most lenders completely shut down their operations during the first lockdown, there is a feeling that the storm has ended and lenders will continue, even if it means picking up the pieces.