The one-click mortgage

The UK’s biggest property website recorded its largest ever ‘Boxing Day bounce’ in 2021.

Traditionally the day that online agencies see a spike in traffic as potential movers use the holidays to plan their new year relocation, Rightmove said enquiries from buyers were up 23 per cent and listings from sellers up by 21 per cent on December 26 last year – the highest number of new vendors ever recorded on that day.

There will be nothing traditional, though, about the way many of those homes are viewed, mortgages financed and conveyancing completed.

Instead of tramping the streets to feign delight at a would-be seller’s dodgy decor, buyers have embraced the idea of online viewings since they were initially forced on them during the pandemic – so much so, in fact, that Purplebricks has even launched a 25-second virtual house tour option on TikTok.

Online home conveyancers, meanwhile, have dramatically cut the cost, time and effort involved in the tedious business of chasing counterparties and paperwork. The need for this, too, emerged during lockdown, when stay-at-home orders resulted in shuttered offices, and added to analogue processing delays.

Which just leaves the financing of the UK’s estimated £1.6trillion home loans market: so, how close are we to a ‘one-click mortgage’? In theory, very, according to Francesca Carlesi, founder of online mortgage lender Molo Finance, thanks to a combination of APIs, Cloud, better data and open banking.

“It will come to a point where you’ll have a native app on your phone, you walk down a street and see a property you like, geolocate it and ask ‘can I buy

But it wasn’t the pandemic that cleared the way for Molo and many others to enter into the mortgage market; that, according to Carlesi, happened when the big banks withdrew from their traditional direct relationship with homebuyers and let broker partners fill the void. For her, it was their worst mistake because it cut the golden thread with homebuyers.

“That’s the biggest thing they’re missing,” she says.“Owning the customer is important, because only then do you know what they really need and can create an experience around them.”

That’s not to say legacy institutions don’t still control the lion’s share of the lending. In fact, when the pandemic property bulge persisted beyond the government Stamp Duty tax break that incentivised it, they piled in with a vengeance. Gross mortgage lending by the UK’s big five high street banks increased in 2020, although, according to Bank of England analysis, profitability fell in the last year.

Meanwhile, UK challenger banks have become increasingly active in the proptech space, although some have been selective about it. Most recently, Starling bought specialist buy-to-let lender Fleet Mortgages, which came with a mortgage book of £1.75billion. Neo savings bank, Monument, is similarly targeting buy-to-let investors, offering a personal and curated property investment service. Meanwhile, challenger Monzo has teamed up with digital broker Mojo Mortgages to help customers remortgage their homes. But probably the most impressive player is Atom Bank, which added £362million of mortgages in H2 2020/21, having loaned £2.8billion since its 2016 launch. It hit a milestone in August, 2021, posting its first month of operating profit, largely due to its mortgage portfolio.

this property?’. The app will tell you, for example, ‘yes, you can, but you need to save for two more months and then this is the best rate you can get’. This is already feasible today. The technical capability is there, and the regulatory environment is allowing it. I’d like to think that it will be made possible by Molo’s technology.”

A MOVEABLE FEAST

Launched in 2018 with the intention of rattling the market’s status quo, Molo came into its own during 2020, with two fund-raises during the course of the year. Its first tranche of Series A investment, a month before COVID began dominating the news, brought in £10million. Just 10 months later, after a spectacular uptick in trade, it secured a further £266million in debt and equity funding, demonstrating just how fast and how far the house-buying environment had changed and how keen investors were on backing the opportunity for innovation it created.

Molo uses proprietary technology to combine automated decision-making and human expertise, working with partners, credit-referencing agency Experian and property website Rightmove.

In Experian’s case, its open banking service offers Molo’s customers the option to provide instantaneous digital verification of their income instead of having to search, save and upload documents, in order to obtain a mortgage, and so secure a property, sooner. "COVID was a moment of truth for everybody,” says Carlesi. But even she was surprised when the explosion in digital traffic during successive lockdowns didn’t go away once they ended. “It has actually remained much more than we thought, so that today we’re probably seeing 30-times higher traffic,” she adds.

The one-cli k mortgage

Francesca Carlesi, Co-founder and CEO of UK online mortgage lender, Molo Finance, has seen the future – and it’s closer than you think

“Challenger banks mostly focus their business activity on a deposit and savings type of product, which doesn’t generate a lot of revenue,” says Carlesi. “So, inevitably, they need to match that liquidity with something on the other side of the balance sheet. Lending products are perfect, and mortgages even more so, because they are big ticket items, so it’s easier to fill the bucket. They’re also very safe; a mortgage is much safer than a personal loan.

“So, you can see why it’s happening, but the way it will happen will be different to the legacy banks’ model.

“The majority of challenger banks that are starting to look into lending and mortgages, don’t manufacture the product in-house. They are either buying assets, which is what Starling did, or partnering with companies that have already developed a capability – because building a fully-digital mortgage experience is quite daunting. In fact, it’s better to have specialists involved; then everybody does what they know best, and can just connect the dots around the customer.

Everybody offers the same type of mortgages. There is no real risk-based pricing: as a borrower, you either fit in the grid, or you don’t

“Fortunately for us, but unfortunately for them, legacy banks have a lot of issues in terms of being able to really deliver a superior digitally-enabled experience,” continues Carlesi.

“They need to re-engineer the process, re-engineer the tech stack. They need to re-think the customer journey, and when and how they do underwriting.”

The availability of APIs, the Cloud, open access to data and the AI to interpret it, have all contributed to one moment in time for proptech providers, says Carlesi. APIs have allowed them to interface with any potential third party through a simple gateway, which is critical ‘because, all of a sudden, you can interconnect different systems that before were very siloed and fragmented’. And Molo, she says, ‘couldn’t have achieved even half of what we have if we couldn’t leverage an existing Cloud infrastructure that was scalable, fast and efficient’.

Machine learning has been key to determining mortgage suitability.

“When we launched our minimum viable product, we thought we knew it all, but we didn’t because every single customer that came through was that little bit different, in terms of personal financial circumstances, from the rest,” says Carlesi.

But the real game-changer, she believes, has been open banking.

“It enables every player out there to access the same granularity of transaction data that a bank can – effectively creating a level playing field for everyone to be able to provide the best financial services experience,” she says.

So, now all that’s needed is some serious product innovation.

“Everybody offers the same type of mortgages in this market,” says Carlesi. “We have 22,000 products and they all look the same. There is no real risk-based pricing, for example; as a borrower, you either fit into the grid, or you don’t.”

Finding new ways to underwrite mortgages, not just price them, she believes, is critical: “It’s the only way to really have a tailored experience and give everybody the product they deserve.”

As for the one-click mortgage, the extreme circumstances of 2020 proved there is another, better, way of doing things. So, in Carlesi’s reimagined, one-click future, the third most stressful experience in anyone’s life – moving home – could become one of the most pleasurable. For anyone poring over video tours of their dream home right now, that future can’t come soon enough.

Just like that: Buying a home could become almost as easy as ticking a box