And is it possible to fix it?
Yesterday morning we opened the Nimbletank offices, rolled out the pastries, cranked up the caffeine and invited industry leaders from mortgage provides and brokers, property search companies and aggregators, long established players and noisy disruptors for a high energy debate about the future of homebuying.
As we were operating under Chatham House Rule, to open up the conversation, we’ll not be naming attendees or attributing quotes but we can disclose that there was a great deal of consensus on some of the key themes that are affecting all businesses in this space.
First up, stress in the system. There was a universal recognition that the current process is far from perfect. This was born out from both personal experience (11 out of 12 attendees were homeowners) and professional experience and customer insight.
The fact that such a big and emotive investment can be so painful and lead to more than 50% of people’s mental health and relationships suffering as they complete the process, points towards a huge driver for disruption and a more customer-centric approach.
So, what else will drive this change? Open Banking was a topic hot on many lips. And while it was recognised that consumer trust and mass adoption will take a few more years, the power of customers opening up their data will be a driving force for change. It will allow for smoother processes, increase automation and the better tailoring of solutions, not just with regards to affordability but also providing richer insights into lifestyle and spending behaviours allowing search companies to serve up a more curated list of potential locations for consideration.
As one attendee stated, getting the value exchange right is the key to the success of Open Banking. People are savvy with their data however, will share it in return for a better product or experience. It was proposed that this ongoing access to people’s financial data will also drive mortgages to become more of a ‘live’ product experience, with alerts to pay rises and incremental income and automated market scouring to identify the tipping point when dealing with early repayment fees and switching becomes more economically viable than sticking with an existing mortgage (even during a fixed period).
Another identified holy grail was the adoption of a Single Customer Portal supported by all stakeholders involved in the conveyancing to completion process. The ideal, being a single customer sign on and verification, for an at-a-glance view of all documents, outstanding actions, progress etc bringing a much greater degree of transparency and control for the customer.
There was a recognition that this is, by no means, a small undertaking and ensuring the right stakeholders were on board would be tricky. There was no alignment regarding the way forward on this one or who would be best placed to create such a portal. There was however consensus that there was a lack of trust in government to create a platform for all and that the big banks would certainly look to build their own as opposed to utilising a third party’s.
Despite this optimism there was a frustration with the continued level of regulation within the industry. To be clear, the attendees weren’t naïvely suggesting that we do away with regs but were calling for ‘Good regulation’ as opposed to ‘more regulation’.
All parties were keen to use data in a more intelligent way, to enhance the current customer experience and improve customer outcomes. Several cited certain regulations, while well intentioned, impacting their ability to always provide the best products to certain customers in the first instance. And this goes hand in hand with concerns around mortgage understanding and education with many people holding off mortgage applications much longer than they need to as, wrongly perceive, that they can’t yet afford one.
One aggregator also spoke of his desire to offer customers a broader comparison view beyond just interest rates by introducing customer service ratings but, to date, he’s not been able to do this. There was a general sense that while the FCA was trying to engage and has developed its own sandbox, that’s being widely used, it is in several situations, stifling innovation.
There are still areas where innovation is flourishing and one mortgage stalwart operating at one of the largest brokers stated that in his 20 years in the industry he’d never seen as much product innovation as is currently taking place. Cultural and demographic changes including the notion of the 100-year life, mortgages with mates, people co-habiting in older age, multi-generational living and solo living are driving a step-change in products on the market.
The process will improve and people’s financial wellbeing will be enhanced. The advent and taken up of Open Banking, the launch of Digital Street, new customer-centric entrants to the market and increased investment in AI will all play their part however continued lobbing of and collaboration with the FCA will be the key to how quickly the current breakages are fixed.