Lenders must prioritise product development over the next year for the mortgage market to adapt to the longer-term impacts of the pandemic, SimplyBiz Mortgages has stated.

The mortgage club suggested that COVID will be a “tipping point” for a change in consumer behaviour and requirement, and believes the market must evolve to meet this change.

Head of strategic development at SimplyBiz Mortgages, Richard Merrett, exclusively told MoneyAge that due to the furore seen across the market in the past year, the single biggest challenge for consumers has been the lack of housing stock.

He pinpointed this as a cause for house prices rising across the country – with Nationwide today reporting a 12.6% annual increase to the average UK house price in the year to February – although Merrett warned the lack of stock has also caused additional pressures.

“Lack of stock means that people need more affordability to be able to buy the home they want, so that then coupled with the sweeping criteria changes we’ve seen has exacerbated a problem that already existed,” he said. “Affordability and access to a deposit has typified the trajectory for the market in recent times, with COVID making that explode.”

Merrett believes the government’s stamp duty holiday “supercharged” the market last year, but suggested the initiative was not the single catalyst that has sparked the rise in housing market activity through the pandemic.

“The biggest impact that has caused this record year for lenders, intermediaries and distributors has been lockdown and that realisation of the importance of home,” he said. “The race for space has typified consumer behaviour, and some of the things that were perhaps more important pre-COVID, such as proximity to a tube station in London, have become less so.

“COVID has had a significant impact on the way that customers behave both in terms of engagement and what they need from a house purchase or a remortgage.

“I think we will eventually revert to a more normal way of working, but ultimately that fundamental shift in the way that everyone is going about their daily lives will cause a long-term shift in the way consumers think about their needs and options for a property.”

Merrett also suggested that shifts in consumer behaviour have extended beyond house purchases, citing the number of people who have increased savings during lockdown, as well as record numbers of borrowers making overpayments.

Yesterday, the Bank of England reported that January saw individuals across the UK borrow £600m in consumer credit on net during the month, split between £100m of additional borrowing on credit cards, and £500m in borrowing in other forms of consumer credit, such as personal loans and car dealership finance.

“There’s been a definite shift in that type of behaviour as well,” Merrett added, as he then highlighted product development as the key area for lenders to target.

He suggested that mortgage products have seen “little evolution over a long period of time” and believes propositions need to evolve to be able to help more potential customers access a deposit.

“In our role as distributors, we are there to act as the conduit and connect suppliers of products – be that lenders, protection providers, or technology suppliers – to advisers and consumers, and improve the journey and options available for everyone,” Merrett said.

“Ultimately, the product development needs to come from lenders. There will be a need for lenders to increasingly define their proposition by the consumer’s position, and how they can be supported.

“What lenders and distributors need to do, and I firmly believe that COVID will be the tipping point for a change to consumer behaviour and requirement, is to look at who the new customers are – this isn’t just first-time buyers but new customers across all spectrums of the market – and develop a product proposition that services their needs. Innovation and evolution is needed to support all these changing points across the market.”

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