The digital age is upon us. You just have to walk down the street to see that mans’ best friend is no longer his dog – it’s his mobile phone. Whether it’s a phone, tablet or laptop, these trusted devices are never far from our side, electronically managing everything from our friendships to our finances.
You needn’t even be inconvenienced by a visit to the supermarket to do your weekly food shop, or a trip to the cinema to catch a film it can all be done remotely from the comfort of your own home – something future generations will also expect of their home buying process.
Controlling your home’s lighting and heating remotely is becoming more popular. Some use their phones to see who is ringing their doorbell at home, ordering a taxi through Alexa / Uber or your evening meal via Deliveroo is pretty mainstream. People are getting used to things happening instantaneously, they just don’t have the patience to wait.
According to the Council of Mortgage Lenders, the average age of a first-time buyer is 30, which means the industry hasn’t yet encountered or had to serve the real ‘digital generation’. To meet the needs of this plugged-in generation, the industry will need to transform itself over the next five to ten years which isn’t that long in the grand scheme of things.
Pause for Breath
Until recently, investing in new technology hasn’t been at the top of firms’ ‘to do’ lists; most of us have had our attention diverted elsewhere over recent years.
Rewind ten years and front end technologies were being relatively well invested in, with the average time to offer around ten days. This investment screeched to a halt when the industry was catapulted into the financial crisis in 2007 and firms had to prioritise and protect their limited resources.
Then, just as the dust was beginning to settle, along came the Mortgage Market Review (MMR). From when it was first announced in 2009 to its implementation in 2014, firms focused on making their systems compliant, and rightly so. The market had just another two years before the Mortgage Credit Directive (MCD) came into effect in 2016 and it is only very recently that the industry has had chance to pause for breath. Investing in technology has once again become a priority.
The first signs of digitisation are starting to break through with the launch of digital brokerages and banks. ‘FinTech’ is the latest buzz word. It’s what anyone, who’s anyone is talking about. In April, the Chancellor, Philip Hammond, described the sector as one of Britain’s most “exciting industries” employing more than 60,000 people and contributing £7bn a year to the UK economy.
FinTech is set to revolutionise and empower firms and consumers in the mortgage market over the coming years; making online fact finds, screen sharing and automated documentation exchanges part of everyday life.
Screen-to-screen technology will open the door for brokers and homebuyers to speak to each other, anytime, anyplace, through their mobile devices. While online passports will offer instant authentication, eradicating the tedious task of having to provide the same identification documents to the broker, estate agent, lender and solicitors.
Instant Mortgage Offers
Most would agree that the MMR and the MCD were the medicine the mortgage market needed, but they have, in part led to the commoditisation of the sector. Customers demand clarity and certainty; their time is their currency and it is the lender’s responsibility to ensure this time is spent wisely. What will make lenders stand out from the crowd going forward will be how quickly they can say ‘yes’.
For the right customer with a good credit record, there is the exciting opportunity for an instant mortgage offer. Borrowers will still need the cooling off period and for the legal work to be completed, but a fast and firm ‘yes’ will give homebuyers the decision they need to choose a property with confidence.
Aiding this will be Open Banking, which is set to be implemented by 2019 and will revolutionise the way you and I transact; save; borrow and invest our money.
Through Open Banking, third parties will be able to access customer and aggregated data held by banks – HSBC has already started this process. For the mortgage market this could mean firms will have access to all of borrowers’ financial data at their fingertips, which will make pinpointing the correct mortgage a great deal easier.
A Threat to Business?
So is the forthcoming digitisation of the mortgage market a friend or foe to the broker community? FinTech should not be viewed in terms of a ‘them or us’ scenario. Advice will still be at the heart of the new digital mortgage era. FinTech should instead be viewed as something that you can use to integrate into your existing processes – or better – replace them and the FinTech’s themselves would be missing a trick if they forgot the customer’s need for the intermediary channel.
Screen-sharing and automated documentation exchanges will reduce admin and paperwork for brokers, freeing up time for you to do what you do best: advise.
The market may not quite be ready for ‘robo advice’, or guided advice but this type of service will, in time be helpful for the financially astute borrowers who need guidance through just a few steps of the mortgage process. No doubt, the technology needs to learn and to be proven and it is unlikely to replicate the subtleties and breadth of advice a broker can give, especially for first-time buyers.
There will still be those borrowers that desire face-to-face advice, or prefer to speak with an adviser over the telephone and there is no reason why you cannot give your clients the choice of all channels – even execution-only.
Tracie Pearce is head of mortgages at HSBC