Mortgage industry in the UK becoming more digitised
More people in the UK looking for a mortgage are searching online to find a suitable mortgage broker, with this sector of the home lending industry seeing business rise, a new report reveals.
Overall the emergence of new digital tools and services is increasingly driving up business,
according to the report from the Intermediary Mortgage Lenders Association (IMLA), but it also found that robo-advice models are unlikely to be popular in the future.
It suggests that as the Financial Conduct Authority (FCA) and mortgage lenders themselves support the further digitisation of the market, consumers will gradually find it quicker, cheaper and smoother to access mortgage finance.
An examination of Google Trends found that more people are looking for a broker online while fewer consumers are searching directly for the best mortgage deal. Indeed, in 2018 searches for ‘mortgage broker’, which now automatically highlight local mortgage brokers with a web presence at the top of any Google search, reached a 14 year high, increasing by 180% in five years.
The growth in customers seeking information on mortgage brokers online has mirrored the growth of intermediary mortgage completions and over 70% of customers now source their loan through an intermediary when changing lenders.
The search findings complement research which suggests customers want a professional who can explain things. Three in five customers today would prefer to speak with an adviser about complex products, such as mortgages.
IMLA’s report also suggests that comparison websites have made limited inroads in the mortgage market, in contrast to other financial products such as car and home insurance. It noted that the comparison websites only provide customers with a list of mortgage products from different lenders based on a very limited range of criteria such as LTV and borrower type. Also, there is no certainty that customers will qualify for the loans they have selected.
While 38% of brokers see the rise of robo-advice as the biggest threat to their business in the next three years, there are a number of barriers that stand in the way of firms seeking to implement a full robo-advice model.
Replicating the softer skills of a human broker, for example where the broker can appraise how well the customer understands the options on offer, will be difficult. IMLA’s own winter 2018 survey showed that 80% of members expect less than 5% of their mortgage business will be served by web-based robo-advisers by 2020.
The report notes that people’s lives frequently don’t fit into neat algorithms. Brokers often successfully challenge cases that are initially turned down by the lender for falling outside its criteria, and will know which lenders usually offer attractive product transfers at the end of an initial deal.
‘We have already seen a number of digital advancements as the industry seeks out solutions to improve the mortgage and property transaction process. But we’re still some way from seeing a completely automated mortgage market as the technology cannot yet, and may never, fully address all customer needs,’ said Kate Davies, executive director of the IMLA.
‘Our findings suggest that consumers clearly appreciate the softer skills offered by brokers. And online tools have made it easier for mortgage brokers to advertise their services and to be sought out by local property buyers seeking information and advice. The digital revolution hasn’t yet disrupted the traditional mortgage journey, but it’s certainly making it more effective,’ she explained.
‘That’s not to say that change isn’t coming. Advancements in Artificial Intelligence and big data capture and manipulation are allowing more of the mortgage transaction process to be digitised. I’m sure we’ll see new and exciting developments in technology and delivery and our members are very aware of the need to keep up to speed with what the market can provide and what consumers increasingly expect, so that they can stay ahead of the curve,’ she added.