There was a time when for most people the process of getting a mortgage meant heading to their local high street.
After a chat with the manager of their local bank or building society, so long as everything was in order, they would get the funds needed to make that home purchase.
Things obviously don’t work like that anymore, but the truth is for an awful lot of smaller lenders there has been a huge reliance on their physical presence on the high street – on the business coming through the doors of their branch network.
The last year should have emphasised that this simply isn’t a realistic model anymore. After all, it’s difficult to get borrowers through the doors of your branch when they aren’t allowed to leave their house.
But for many people a mortgage journey that relies on physical interactions is not only undesirable, it’s not actually possible given their own work responsibilities. And so inevitably these borrowers will look towards lenders who they can deal with at a time that suits them.
Online banking revolution
The next generation of mortgage borrowers have spent their lives online and expect to be able to deal with the businesses they use through their various devices.
Some areas of personal finance have adapted to this already – just look at the way challenger banks like Monzo and Starling have shaken things up in the current account market, or the way that peer-to-peer lenders have built such an important presence in the personal loan space.
But when it comes to mortgages, there is still a lot of work to do, with huge parts of the process still overly reliant on paper forms and physical documentation.
Is it really any great surprise that large numbers of borrowers find the mortgage process so unsatisfactory, given the paperwork hoops they are expected to jump through?
Borrowers want to be able to communicate with their lenders online, not feel compelled to turn up in person to a branch.
If lenders are to not only survive in the future, but thrive, then they will need to adapt. Technology isn’t something to be feared – it can be put to use to drastically improve efficiency and speed up the whole process.
Open banking for example can take on huge amounts of heavy lifting when it comes to aspects like verifying a borrower’s income, financial position and even their identity.
Technology can also do so much to help lenders with their distribution. It would be lovely to be able to rely on people walking past branches and seeing your products advertised in the window, but that simply isn’t going to cut it.
If lenders are going to get their rates in front of borrowers, then again technology can play a bigger role.
Distribution channels
Intermediaries play a significant role in the UK mortgage market, accounting for around three quarters of the mortgages taken out across the country.
It’s one thing for the big lenders to have business development managers calling in on brokers in every region, flagging up their latest product designs, but that’s not going to be an option for the smaller players.
Yet there is still a huge opportunity for these lenders to make use of intermediaries as a distribution channel, and once again technology is the key here.
Smart partnerships with the right technology firms can ensure that advisers are well informed about your product range, what sets you apart, and how you can help their clients.
Branches will of course still play a role – there are some borrowers who will always prefer the experience of dealing with a lender in person, particularly given the sums involved with a mortgage compared to other forms of credit.
The key for ambitious lenders will be catering to all sorts of borrowers, combining that traditional branch operation with meeting the needs of the online generation. Branches alone will no longer cut it.
Karl Deeter, is CEO OnlineApplication.ie
