Mortgages  

Brokers’ urged to act on 'threat' of digital mortgages

Brokers’ urged to act on 'threat' of digital mortgages
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Traditional mortgage brokers’ client bases could “dwindle” if they don’t evolve to compete with digital entrants.

Jonathon Stinton, Coventry Building Society’s intermediary relationships head, told FTAdviser brokers had a captive audience if they got the digital play right.

“Traditional brokers, ones working on referrals with no website or social media - unless they evolve, their client base could dwindle over time,” said Stinton.

If they did not get this right, Stinton said digital brokers “have the potential to put customers off traditional brokers”.

The UK’s digital brokerage space has attracted significant investments of late. Habito landed a £35m funding round back in August 2020. In July, Mojo Mortgages and Trussle were bought by US-backed firms for their technology. 

Then last week, London-based Charles Cameron & Associates - which developed a fully remote advice service during the pandemic - was bought by Socium Group.

“Brokers need to have more than one approach to client acquisition and retention,” said Stinton. 

“‘How do you want me to engage with you?’ should be a question brokers are asking. Traditional firms need to be holistic, rather than fall back on ‘it always worked this way’. Bigger firms will start to penetrate this sector.”

While Stinton recognised the ‘tech threat’, others in the industry were not so concerned by the competition.

“There is money out there,” said Martin Stewart, director of franchise advice network The Money Group. 

“Investors are buying into the dream of digitising mortgages. But a lot of this money has been burnt. We’re not going to spend millions on a load of kids wearing converse playing pool in the kitchen. [...] We can manage the tech threat.”

Jeremy Duncombe, director of mortgages at Yorkshire Building Society, called technology an “enabler” for good advice. 

All the UK’s digital mortgage brokers employ their own advisers, using technology to digitise parts of the application process. Though this has led to some players admitting to mistakes in the advice they have provided to borrowers.

“Technology is an enabler for good advice,” said Duncombe. “It has brought the market where it needed to get to.

“Brokers should embrace the technology. Firms still employ advisers because it’s an enabler to start the advice conversation.

“Ultimately everything is advised. So the word ‘robo-adviser’ is a misnomer. It’s either execution-only or advised, you can’t have a halfway house.”

Stinton said robo-advice “hasn’t really accelerated to the point people thought it could have”. 

“It’s got its place,” he added. “But do I think it’s going to knock the traditional mortgage broker out of the way? I’m not so sure. But we can learn from them on certain processes and efficiencies.”

Recent research by Yorkshire BS found 78 per cent of 2,000 first-time buyers it surveyed said they would like to use a broker to help them arrange their first mortgage.