Here is a fun fact with which to entertain your friends in the pub: houses with the number 13 are worth an average £22,000 less than neighbouring properties, according to a 2019 study by Stone Real Estate.

While this may seem quite innocuous, actually it is rather interesting. Bear with me and I’ll explain why.

On the face of it, these two facts seem unrelated. However, the data reveals a correlation.

Aside from showing what a superstitious nation we are, it tells us that there are unexpected opportunities for those who are not afraid of the number 13.

Proactive approach

Often lenders plan their next product launch by looking at the data from the past few months, such as the quantity and type of mortgages sold.

For instance, if they have sold a significant number of products to self-employed borrowers, they may redesign their next product to take advantage of this market; as long as, of course, it also fits with their current risk profile.

The key to using data will be doing so holistically

We notice this with particular product launches, or when criteria are adjusted to encourage more of a certain type of business. However, by looking retrospectively, lenders are always behind the curve.

Increasingly, there is a need to examine real-time data, such as the searches that brokers do on behalf of their customers. By observing data in real time, lenders have the opportunity to react to a need that is happening now, not one that existed three months ago.

Lenders’ need for real-time data has become more apparent during the pandemic, with furlough and bounceback loans, for example. These were vital — but only for relatively short periods. There is little point now looking at search data or reports that show there was a demand for lending to people on furlough. It was very relevant in August, but not in November when the scheme had already ended.

It is not a question of if real-time data will start driving decisions, but when

The three-month data will show this type of information, but what lenders need to see is what brokers are searching for now — so the products they launch can hit that need.

Enhanced flexibility

By using real-time data, lenders will be able to develop mortgages to fit today’s needs.

There are already some lenders in the bridging space embracing flexible lending and developing bespoke products according to need and risk. While at the moment this is possible in the bridging market due to the lower volumes, it is something that eventually can come to be mainstream.

By analysing data trends, lenders may discover they are missing out on a certain level of business

It could become really bespoke, with lenders not only looking at England, Wales or Scotland for trends but digging into specific postcodes for particular sorts of borrower.

This type of bespoke or geographic lending will inevitably reach the residential market, perhaps starting with challenger banks and digital lenders. When it does, it will be augmented by machine learning.

By using algorithms and artificial intelligence, lenders can take account of a borrower’s individual circumstances, and risk pricing can become more sophisticated, looking at smaller groups of people rather than across a whole lending book.

Data revolution?

By analysing data trends, lenders may discover they are missing out on a certain level of business. For example, people with a tier-two working visa are often looking at buying for the first time, and often using housing schemes. A lender may cater for both first-time buyers and housing schemes, but then not lend to those on a tier-two working visa.

Having insight into the type of property a self-employed person buys can enable the lender to adjust its criteria so that it captures this corner of the market.

The key to using data will be implementing it holistically. Criteria data can’t be used in a silo; it will need to be combined with affordability to give a full picture of the borrower, and then the lender can assess the risk accurately.

What lenders need to see is what brokers are searching for now — so the products they launch can hit that need

Data is developing all the time, but it needs to be utilised. At Knowledge Bank, for example, we have developed insights data to uncover trends that will benefit brokers and lenders alike. We can enable lenders to analyse the market by geography, but this is just the beginning.

With the benefits of data becoming clearer and clearer, it is not a question of if real-time data will start driving decisions, but when.

Nicola Firth, chief executive, Knowledge Bank