Regulation  

How a broken mortgage market gets back on its feet

Figures from Lloyds Bank show that the number of people moving house fell for the first time since 2011 – 354,000 people moved home in 2016, a four per cent fall compared to the previous year.

When you add in all the other extra costs, such as estate agent fees and conveyancing fees, the average cost of moving home has jumped to £11,000. Given these whopping numbers, it is no wonder that many people are opting to remortgage and smarten up their existing home instead.

This is particularly popular in London, where property prices are high and space for new structures is limited; between January 2012 and December 2016, there was a 60 per cent increase in home improvement applications in London. Remortgaging can be the best way to finance these works, particularly over more expensive bank loans.

Getting a mortgage

Before online brokers emerged on the scene in early 2016, getting a mortgage was a painful endeavour. It meant queuing up at a bank, or spending hours on hold to speak to a call centre mortgage broker. Booking a face-to-face appointment with an adviser did not guarantee a smooth transaction either and often commanded a £200-plus fee. The period of time after your application was no better, with drip-feed like progress held up by mountains of paperwork.

From a consumer’s perspective getting a mortgage or remortgage was nothing but stressful. Research shows that 25 per cent of Londoners could not be persuaded to go through the mortgage application process again. 

This so called ‘mortgage paralysis’ caused by painful memories of being a first-time buyer, is incredibly costly for consumers and will only become more so with the additional rate hikes predicted for the next few years.

In its present state the mortgage market is failing consumers. It remains confusing, opaque, and as such disadvantages homeowners so that all too often they are left paying significantly more than they need to, or are losing out on their dream properties. Technology has transformed and simplified other aspects of our lives beyond recognition, but the mortgage application process is still little different to what it was 30 years ago. 

Open Banking  

Technology holds the key to how the mortgage industry works. It gives consumers new tools that make switching a mortgage as easy and commonplace as switching a utilities provider, but with much more significant savings. Also shaking up the status quo is regulatory change, including Open Banking, as well as a new breed of fintech startups such as online brokers.