REVIEW
TECHNOLOGY
What lenders do next will be key Steve Carruthers Head of business development, Iress
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his year marks Iress’ Mortgage Efficiency Survey’s 11th outing. Interview invitations have been sent out, and I’m pleased to say that we’ve already had a really good reaction from lenders willing to take part in this annual research. These reports have lasting value for our own business, but also because they provide insight into the temperature of the market overall. Each business faces its own challenges, particularly when it comes to how efficient their processes are. Last year’s report found, perhaps unsurprisingly, that lenders had spent 2020 and early 2021 investing heavily in measures to improve their processes. Lockdowns and remote working precipitated by the onset of the pandemic forced all businesses to review their models, driving them to adapt to a more flexible and accessible working approach. Lenders told us almost across the board that they had spent the past year focused on “system modernisation, process efficiency and digitisation”. At the time, we found huge gaps among lenders’ processing times, with significant variation in application-to-offer timescales – ranging from 14 to 32 days. Reliance on brokers also saw an uptick, from 77 per cent to nine out of 10 mortgage applications coming via the intermediary channel. Given the complexity of the mortgage market, the vast swell in demand on the heels of the stamp duty holiday, and bestbuy mortgage rates barely over one per cent, the value of mortgage advice for
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MORTGAGE INTRODUCER JUNE 2022
borrowers went through the roof. This context is important to keep in mind when collating this year’s survey. We’ve seen the base rate hiked four times since December, with it now sitting at one per cent. Mortgage rates are rising too, but so far, despite climbing borrowing costs, demand remains robust. Property prices are not only holding up, they are still rising at a rate in the double digits. Office for National Statistics figures recorded an annual rise of 10.9 per cent in February. The need for agility and efficiency is constant for any business, and after 12 months of focus on improving both, lenders are now seemingly eager to talk about the future. Already, just a few days into the interviewing stage, we’re hearing considerable positivity about the year ahead. Having just emerged from the latest reporting season for banks and building societies, it’s no wonder. 2021 was a record year for gross mortgage lending, with lenders advancing £315.9bn in 12 months, Bank of England figures show. Lender balance sheets reflect that, with the vast majority looking very healthy. This bounce in confidence is enduring, and the lenders we’ve spoken to are already positive that this year is one in which to focus on future-proofing their businesses. What that looks like for each lender is different, but there are some key themes emerging. While environmental, social, and governance are all priorities for lenders, the green agenda is the big one. Regulation designed to drive lenders to cut their own carbon emissions and support borrowers in improving their homes’ energy efficiency is now coming in at pace. EPC band rating minimums are now looking very real indeed for owner-occupiers and landlords.
In April, the government confirmed it is bringing various deadlines forward. Lenders are acutely conscious of this, with new products and green mortgages increasingly a focus across the market. The Bank of England has been very clear about its expectations of lenders’ role in helping to cut carbon emissions produced by the UK’s housing stock. Further product innovation and, inevitably, the process changes required to facilitate that are firmly in the minds of lenders for this year. The Minimum Energy Performance of Buildings Bill, currently in its second reading in the House of Commons, proposes to make it mandatory for all homes – including owner-occupier – to have a minimum EPC band rating of C or above by 2035. While 12 years may sound like a long way off, it’s clear that homeowners need to be thinking
“Further product innovation and, inevitably, the process changes required to facilitate that are firmly in the minds of lenders for this year” now about how they’re going to pay for gas central heating to be replaced by electric heat pumps, double- or triple-glazed windows, and insulation of cavity walls and roofs. Given that the ill-fated Green Homes Grant hasn’t been replaced, the onus is firmly on lenders to find a way to support borrowers in paying for these changes. That’s something that will have to happen fast, as the Bill also stipulates that by 31 December 2030 all mortgage lenders must ensure the average energy performance level of their domestic portfolios is in at least EPC band C. This year’s Mortgage Efficiency Survey will achieve two important things in understanding the last year’s performance and also casting a light on how lenders are adjusting to this future, and where they can take advantage of opportunities as they emerge. M I www.mortgageintroducer.com
