Lenders accused of holding back mortgage market

EDM Mortgage Support Services predicted it will take the UK mortgage industry two years to be sharing digital information effectively.

In May, the Queen’s Speech included promises to encourage switching providers under the Digital Economy Bill, with banks and building societies forced to sign up to a seven day time limit on mortgage switching, much like rules in place for bank accounts.

The Council of Mortgage Lenders took issue with these “unnecessary” steps, pointing out they come alongside a similar call for input from the Financial Conduct Authority, looking at mortgage market competition.

EDM’s managing director Joe Pepper branded said from a competitive point of view, if all organisations can agree to share non-sensitive information and non-customer-specific data, the technology already exists today to achieve the target.

“By bringing the process online and making progress on cases available to all parties, including intermediaries, it becomes a reassuring process which can help ensure brokers and clients understand where they are and secure transactions,” he said.

Data sharing will happen organically as the industry moves to meet the competitive challenges of some of the current industry front runners, Mr Pepper said.

But seven-day switching will only happen with a government mandate, “as it will require change to processes which currently hold up the overall service for the benefit of a few vested interests at the detriment to the wider market”, he claimed.

We would need to find common ground that alleviates the operational pressure on all stakeholders. Daniel Hegarty

Henry Woodcock, principal mortgage consultant at Iress, said lenders and brokers have tried to connect the mortgage market from point of sale through to provider to reduce time, friction and costs to deliver an improved customer service experience.

“There are still a number of disconnects in the intermediary mortgage market,” he said.

“The smart technology that’s evolving will be able to connect incumbent systems and processes, removing multiple logins and data duplication, to deliver a decision in principle and submit an application without the broker having to leave their desktop CRM system,” Mr Woodcock said.

The last time an industry wide initiative was mooted, to enable mortgage brokers to trade electronically with lenders, was back in 1998.

The CML planned for a single, industry-owned electronic trading platform, backed by 20 lenders. This did not progress however, as there were concerns around whether it could result in controlled access to lenders.

To date there has been no significant push from the regulator or the government to centralise onto a single connnection point between brokers with lenders. The FCA has been making steps to open the mortgage market to technology, including looking at barriers to innovation in digital and mobile solutions.

Daniel Hegarty, chief executive and founder of digital broker Habito, said it hasn’t happened for a few reasons.

“Firstly, lenders are fundamentally incentivised to want their customers to stay on their products, as SVRs are hugely lucrative and an efficient market puts pressure on their profit margins.

“Secondly, most lenders have neither the technical capability or budget to make these kinds of enhancements a priority. Without lender participation, this pipe is blocked before its even been built.”

As for the broker market, he said it’s also difficult because of fragmentation and lack of technical experience.

“Lack of digitisation can often expose customers to unnecessary delays, searches on consumer credit files and even in declined applications.”

Mr Hegarty added it is more likely that change will be brought about destructively rather than collaboratively, by new market entrants outperforming incumbents.

“I think this would be a huge shame; a lot of the knowhow and expertise that exists now will be lost and lessons will have to be relearned, inevitably at the cost of the consumer.”

peter.walker@ft.com