Loan Introducer

The need for speed in the mortgage market

Matt Meecham

chief digital officer, Evolution Money

Just like Tom Cruise in Top Gun, we all find we have the need for speed from time to time – not least when we’re trying to complete a mortgage application.

The first- and second-charge mortgage markets have made some great advances over the last decade in their move to digitalisation, but now is the time to step it up a gear.

Technology firm Yapily recently crowned the UK the best European adopter of open banking – beating Germany and Sweden to the top spot for the second year running.

There are now six million active users of open banking in the UK, with such payments growing 500 per cent yearon-year, according to the latest statistics from the Open Banking Implementation Entity (OBIE).

Evidently, the country as a whole and the industries within it are doing well in the fintech process – so why is the mortgage market still lagging?

There is no escaping the fact that some firms face significant barriers to implementing change, and the bigger the firm, the bigger those challenges often are. For some of the largest lenders, significant cost, time, and resources are needed to implement any digital move, in part due to legacy system issues.

In a fast-paced mortgage market – especially one coming out of Covid and, in some instances, struggling with staff shortages – making the time for such upgrades has not always taken priority.

Another big factor is a lack of incentive or urgency. In any other consumer-driven industry, when faced with slow service, clients would simply look elsewhere. A time-consuming, non-digitalised approach from a current account provider, for example, would result in the user switching providers.

The mortgage market is unique in that it is not like other financial sectors. The transaction – for mainstream clients, at least – is, for the most part, rate-driven. Lenders offering a competitive rate thus know they will win business, regardless of the service they offer. This can be frustrating for borrowers and advisers.

The tide is turning, however, as we are seeing an influx of new lenders and advisers to the market who are technology-led. This increased competition should help drive change. A wider cultural shift will also help prioritise fintech for those providers that haven’t already done so.

More than 70 UK companies and organisations, including Evolution, are currently trialling a four-day working week. Some 3,300 workers, based throughout the UK and representing more than thirty sectors, are receiving 100 per cent of their pay for 80 per cent of the usual working time, in exchange for a commitment to maintain at least 100 per cent productivity.

We have joined this move because we believe that, if the mortgage industry is to continue to attract the best new recruits, we need to compete with firms and sectors that embrace flexible ways of working.

A four-day working week, however, is currently unachievable for many other mortgage firms without further slowing down borrowers’ applications. Thankfully, we are not among those firms.

The recent spate of short-notice product withdrawals in the mortgage market highlighted some of the inefficiencies in the current market, with brokers working out of hours and wasting time on hold, chasing the progress of their cases.

Our ability to embrace a true digital journey, however, means that a lot of the time-consuming manual tasks in the mortgage application process can be eliminated though digitalisation – freeing up underwriters and advisers to focus on more complex cases, and thus reducing our costs.

As more lenders in both the first- and second-charge markets follow our lead and start to implement new technologies – the benefits of open banking and a more automated way of working are becoming clearer – we will increasingly see those that are not adapting get left behind.

Open banking will play an increasing role in helping those clients that require more than a tick-box approach. The cost-of-living crisis and the increasing complexity of some borrowers’ financial makeup is requiring more in-depth insights into their finances. By accessing a borrower’s bank accounts and up-to-date financial information, we can more accurately assess what products are available to them and gain a deeper understanding of their finances, which leads to a better-informed lending decision.

The pace of advancement is perhaps somewhat quicker in the specialist and second-charge markets, with lenders like us using open banking, apps, and digital ID verification to speed up and streamline the customer process. This is having a significant impact on funding timelines and can provide a competitive edge for those borrowers who may need funds quickly.

A small cluster of firms cannot drive change alone, however, and a broader approach is needed from all within the mortgage market to deliver real advancement.

The mortgage industry is very close to a largely digitalised process – but for this to happen, lenders and advisers need to make it a priority. M I

Let’s add more substance to the statistics

Tony Marshall

CEO, Equifinance

Depending on which metric you pay attention to, the recovery in second-charge lending continues to make headlines. However, the rhetoric is still linking the sector to a narrative that is forever stuck in a bouncing-back mode, and over the last twelve to eighteen months, we have become used to seeing gains in new business expressed as a percentage increase over the same month in the previous year.

This presentation of the figures obviously helps to draw attention to how much the numbers have improved in twelve months. Being able to use percentage improvements of 20, 30, or 40 per cent also looks dramatic, but I think we need to move on as an industry. The improvement message has been useful, but the danger is that second-charge business reporting has entered a loop in which the only thing that changes is the monthly percentages – which sound impressive at first, but begin to pall over time.

It probably doesn’t help that when we consider the volume of new business in the first-charge sector, second-charge business is, in terms of size, a sideshow, albeit an increasingly important one. So there is more than a touch of small-man syndrome in the way the sector sees itself in relation to its much bigger sibling – and that has tended to inform the messaging to intermediaries about the relevance of second-charge lending. This is why I Yes, we are making progress in getting the message across about where and when a second-charge solution can be a better option for customers

think it is important that we start to move away from a constant monthly percentage increase/decrease-led narrative. Admittedly, to make any story newsworthy it needs a hook to draw in readers – but surely it is possible to make our stance more robust so that second-charge lending is judged on its ability to prosper on its own, rather than as a poor relation to its first-charge cousin?

There are good signs. I have been delighted to see some industry figures, whose business propositions to brokers include a strong secondcharge proposition, offering robust evidence of how our channel has more than enough substance and attendant USPs to stand on its own two feet.

Yes, we are making progress in getting the message across about where and when a second-charge solution can be a better option for customers. It has also been a few years since the FCA made it clear that advisers should discuss second-charge as an option in meetings where capital-raising is on the agenda.

However, for all those who still believe that the only method of capital raising is remortgage, the introduction of Consumer Duty and the attendant reporting that will be required to show the regulator why clients were recommended a particular course will ensure that brokers will have to demonstrate a more even-handed approach to their future recommendations.

In the meantime, I would like to see the second-charge community be more positive about our sector. I am sure we are all delighted to see the monthly percentage increases in new business measured against a previous period – but without more substance in the form of positive reinforcement to back up the data, the average broker will get tired of the same story.

THE BORIS FACTOR

The recent resignation of Boris Johnson as leader of the Conservative Party – and as PM after a leadership contest – has sent many trade journalists into a frenzy about the possible effect it might have on government plans for the property market as well as on the funding industry in which we make our living.

Can we expect radical changes to policy, and will the markets recoil at the change?

In short, no.

Boris’s departure won’t make any difference, and certainly not in the short term. The parliamentary recess will be upon us when you read this, and does not end until September, so not much of anything will happen until the autumn. Then a new leader has to be chosen who will then become PM – that is, if Boris is allowed to stay as caretaker until the leadership contest is decided.

Of course, predicting the future, particularly in such volatile times, can be a little like trying to nail jelly to the ceiling. If the Labour Party and other opposition parties are able to engineer a no-confidence vote leading to a general election, then we might indeed be in for some interesting times in 2023. M I