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Silicon Valley is the real threat, not digital brokers

Silicon Valley is the real threat, not digital brokers

Consolidation in the digital mortgage space has spiked in recent months as larger companies bought up the technology to service their own customer bases.

Having attracted some hefty investments over the last year too - most notably Habito’s £35m Series C in August 2020 - it seems fair to ask traditional intermediaries: how much of a threat are these digital brokers?

On this week's FTAdviser Podcast, reporter Ruby Hinchliffe is joined by Charlotte Nixon, mortgage adviser and protection proposition director at Quilter, and Billy Grimley, chief commercial officer at Smartr365.

“Coming from a tech background myself, a lot of these companies - they're not tech companies. They're big marketing-spend companies," said Grimley.

“If you gave most mortgage brokers £35m, they could build what they would call a tech company. But the actual underlying tech behind these isn't really anything the wider market would be concerned about.

“In my day job, I've seen behind the magician’s curtain at some of these companies and it’s not particularly impressive tech that they're using.”

Whilst Grimley acknowledged consolidation “is always worrying”, he said the reality was that since its inception, the mortgage market has always been home to massive players - most notably the banks, which operate on enormous budgets and already boast big market penetration.

What does keep Grimley up at night however, is the potential for “true” tech disruption in the UK mortgage market from Silicon Valley.

“There’s a worry that somebody somewhere from a Silicon Valley-sized company is going to look at the [UK’s] mortgage space and realise the amount of money that's moving through here.

“With a few per cent here and there, the amount of money that can be made could see a true tech player come in.”

But in the current climate Grimley doubts the market will see this anytime soon. “Until the regulation from the government’s side catches up with the reality of the modern tech space, it's not an enormous concern.”

Nixon added whilst technology “is only going to improve the mortgage journey”, where the market needs to be mindful is around its tech alignment - which she argued was one of the barriers to Grimley’s “true” disruption.

She explained: “We work with a huge number of lenders. We have a huge panel of them. [...] They’ve got different lenders, applications systems, different sourcing systems.

“The need for advice is always going to be there, especially until we can get some consistency or some technology where we can align all the different lender application systems, criteria, risk approaches and have a more joined up approach across all lenders.” Nixon called this “an absolute dream and a wish list”. 

“I can't ever see this happening,” she said, before concluding: “That's where I think the need for an adviser is always going to come in, because you're going to need that expertise of ‘right this lender is good for this particular client type’ or ‘this particular need’.”