The mortgage process is “a frustrating, antiquated industry of jargon, complexity and fax machines”, according to Daniel Hegarty, founder of online broker Habito.
There is widespread acknowledgement that remortgage applications generally proceed at a snail’s pace. However, many within the industry insist that improvements are being made to the process – albeit slowly – through better information sharing, adoption of technology and the emergence of so-called robo-advice firms such as Habito.
At present, remortgaging typically takes four to six weeks, according to Trinity Financial product and communications director Aaron Strutt. This compares poorly with other switching processes, such as in banking – where it takes seven working days to transfer to a new bank – and the mobile phone sector – where it can take just a couple of days to change one’s provider.
Digital Mortgages by Atom Bank director Maria Harris says: “The mortgage industry has, for years, lagged behind the rest of the financial services sector due to the need to be process intensive and a reluctance to adopt new technologies.
“Traditionally, the sector has been disjointed with complicated communications and a lack of transparency.”
The Government weighed into the debate in May last year when the then Department for Business, Innovation & Skills included mortgages in a list of sectors where it proposed consumers should be able to switch provider in a week or less. It asked the industry to respond via a call for evidence but Westminster has yet to announce its next move.
The subject now falls within the remit of the new Department for Business, Energy & Industrial Strategy, which says the issue is on its agenda but below other, more important matters – likely to be Brexit and the general turmoil in the Government.
“Seven-day switching may be a big ask in reality but that should not stop it from being desirable, and any improvement should help,” says London & Country associate director David Hollingworth. “A simple remortgage should be a relatively straightforward process.”
Greater speed brings risk, of course. Before the credit crunch, an impulse to fast-track mortgage applications drove irresponsible lending. These deals were often based on automated valuation models and put less emphasis on proving affordability.
Brokers contacted by Mortgage Strategy say most delays to mortgage applications occur during the conveyancing process, particularly where free legal work is provided. They argue that lenders’ nominated solicitors often cannot cope with the increase in volumes resulting from these giveaways.
Strutt says: “Most complaints our brokers receive are about delays from the free legal services.
“If a client is in a hurry, we advise them to take a cashback deal instead and use one of the online solicitors we recommend. They can halve the time it takes to get the deal through.”
Hollingworth adds: “Recent issues around free legals have come down to larger volumes being thrown at firms that weren’t expecting it, and/or poor communication to the panel that manages the process.”
LMS is one of the major panel managers of conveyancers. Its chief executive, Andy Knee, responds to the criticism.
“Borrowers don’t think conveyancers move fast enough,” he says.
“Judged against their peers – brokers, valuers and lenders – conveyancers come last on a number of measures, from value and speed to proactivity and the stress generated.
“However, conveyancers are often the end of a chain and can be left to highlight unexpected issues. They are a check and a balance and perform more unglamorous tasks.
“Nonetheless, there is room for improvement.”
Lack of automation
Complaints about the mortgage process extend beyond the legal aspect, however. Many point to the over-reliance on paperwork on all sides, and the relative lack of automated systems.
Where data is not shared, overlapping application forms each require completion from scratch; identification checks can be duplicated; and the sheer number of stakeholders involved – brokers, lenders, valuers, surveyors and more – adds complexity.
“Taking out a mortgage is radically different from [arranging] a current account or insurance,” insists Building Societies Association mortgage policy adviser Robert Thickett.
“It relies on multiple industries working in tandem to ensure all correct checks are securely made.”
Meanwhile, UK Finance spokesman Bernard Clarke says: “Firms must also complete rigorous regulatory requirements, ensure properties provide adequate security and guard against fraud. These make remortgaging more complicated than switching a bank or utility provider, but can cause frustration.”
In a UK Finance survey commissioned this summer, 44 per cent of lenders said they regarded compliance as an inhibitor of change. Yet some newer market entrants, such as online brokers Habito and Trussle, are promising to shake things up and make the process slicker to overcome the various constraints. It is still early days, however.
Trussle founder Ishaan Malhi says: “Through technology, design and expertise, we’re making a traditionally cumbersome process smarter, faster and more transparent.”
Thickett says technology improvements undoubtedly could streamline processes. He points to the Land Registry’s imminent launch of a ‘Sign Your Mortgage Deed’ service, which will enable borrowers to sign their deed digitally online.
Clarke says: “One way lenders try to speed up processes is by looking at how they can work better with other stakeholders. Access to information hubs, where different property professionals can work on a transaction and customers can monitor progress, is becoming more widespread.”
Hollingworth is hopeful that Mogo – a service from credit reference agency Callcredit that enables applicants to submit bank statements digitally to lenders – will remove the need for some of the traditional paperwork.
Prospects for improvement
Looking further ahead, some in the industry are excited at the prospect of the Open Banking system, due for launch next year, which will oblige banks to digitally provide other organisations with access to their customers’ financial data where consent has been given. This should significantly accelerate numerous types of financial application.
Amid apparent change, however, obtaining a remortgage is still the slowest of all the mainstream account opening or switching activities.
In an era driven by tech pioneers such as Amazon, Apple, Facebook and Google, which has led consumers to expect many transactions to be carried out ‘yesterday’, there is an acceptance that the snail-paced mortgage industry is a long way behind.
My snail-like remortgage: a personal view
By Guy Anker
Banking, broadband, energy, insurance, mobile – I’ve switched them all. While some transfers were easier than others to arrange, none were as slow as my six-week slog to remortgage earlier this year.
It took a week from application to offer; then came the drag of the conveyancing process, which lasted five gruelling weeks.
The hold-ups began with the lender failing to instruct a solicitor for two weeks, despite my chasing. As I had free legals, I could not pick my own firm.
Then, despite having completed identity checks and a comprehensive form when applying, I had to do both again with the conveyancer. Couldn’t my information have been passed on?
Over the next two weeks I was asked to submit various items of paperwork, which could have been requested on day one because nothing new had emerged.
The conveyancer even tried to charge me £24 for a title information document I had not requested. Fortunately the sum was refunded.
I am just one of millions of remortgage customers but I know my story is typical.
Mortgages are complex. Yet there is a lack of communication between lenders and solicitors; firms cannot cite regulation as the cause.
Some may say the ‘old school’ culture is necessary given all the required checks. While I accept remortgaging will necessarily take longer than other switches, the mortgage industry needs to update its image from being the snail of consumer finance.