Despite having a lengthy history, there is no doubt that the mortgage sector will become predominantly digital. Mortgage providers are increasingly relying on digital solutions to draw in new clients, keep existing ones, and speed up the loan process as tech capabilities and consumer expectations grow. Over the next two years, more than half of banks and 75% of building societies intend to significantly alter their mortgage origination systems according to a research report by Celent. That said, what must lenders do to future-proof their businesses in light of how the mortgage market is evolving?
Mortgage lending: the rapid adoption of digital technology
There are several factors that have accelerated the digitalisation of mortgage lending. One is changes to consumer behaviour: customers have come to expect smooth digital experiences across all areas of their life (accelerated by the pandemic). As such, they seek similar ease, speed and efficiency when it comes to home buying.
Then there’s the arrival of fintechs. Newer fintechs are beginning to enter the mortgage sector – often through acquisitions, such as Starling Bank’s acquisition of Fleet Mortgage or Zoopla acquiring YourKeys. They are also bringing with them innovative digital solutions, which raise the bar for the whole industry. At the same time, regulatory changes are helping accelerate and facilitate digitalisation, such as the Bank of England’s decision to withdraw its affordability test recommendation and cut some of the red tapes around mortgage lending, and HM Land Registry’s acceptance of electronic signatures. The combination of these forces has played a significant role in accelerating the lending process and making it more efficient.
Today’s financial institutions are offering a wide range of digital options, through online and mobile platforms, to their mortgage customers. Services include easier ways for customers to access and manage their mortgages, schedule a session with a mortgage advisor, find personalised recommendations, and access improved security measures to protect sensitive customer information.
That’s not to mention the embrace of open banking has enabled the seamless integration of customer data into the lending process. This innovation is helping reduce the number of steps needed to collect data and resulting in faster processing times, less rekeying of information and lower origination costs. Offering faster, cheaper loan decisions is a crucial advantage in an increasingly-crowded mortgage market and automated processes reduce teams’ manual work and eliminate costly human errors.
Agility is key – that’s where SaaS platforms come in
The success of these new products and processes relies on the way mortgage lenders introduce and configure them. Agility is key – lenders need to prioritise reconfigurability and scalability when building new products and choosing technology partners, as they must be able to quickly launch new features or make adjustments, in line with evolving customer expectations, emerging trends, and changing industry regulations. The use of software-as-a-service (SaaS) platforms and application programming interface (API) integrations helps with this, allowing for faster feature launches and less internal friction.
APIs are just part of future-proofing the mortgage market. According to Forbes, 55% of senior executives in the US mortgage industry think that AI will make their firm, and the industry overall, more competitive. AI and machine learning can assist lenders in analysing data more quickly, leading to more efficient decision-making and forecasting, although as with all AI applications, providers must be vigilant about encoded bias that can radically increase discrimination.
Digitalisation is changing the mortgage industry – and this shift is going to continue. Lenders who don’t want to get left behind will ensure they are future-proofing their processes through lending automation and placing customer needs at the heart of their offering. This will ultimately yield great results, and keep loyal customers satisfied.
