The ‘always on’ digital age in which we live means consumers now expect companies to be able to communicate in a fast, accurate and relevant manner. The challenge for mortgage lenders is keeping pace with this technological change to ensure they remain competitive.
It is with this in mind that companies are pushing technology boundaries. New digital advancements are being reported every week in the media, from Santander’s ’30 minute’ online remortgage application, which is enabled by Hometrack’s AVM, to Habito’s artificial intelligence-based mortgage advice service.
The purpose of both these offerings essentially, is to streamline the mortgage application process and reduce the time to offer. This has become a key commercial objective for all lenders as the competition to provide the best customer experience has never been so fierce. The fact that consumers are more digitally-savvy than they once were is one of the reasons for this, but record low rates have also meant customers now shop less on price and more on service. Time to approval is also a critical leading indicator of customer satisfaction in mortgage businesses, which is something that has not been lost on those that care about the FCA’s focus on customer satisfaction.
Assumption vs evidence
However, the technological revolution hasn’t overhauled some long-standing practices among mortgage lenders. In any market, accurate valuations of assets are vital to the commercial performance of a business, no more so than in the property and lending industry. Accuracy inspires confidence and crucially reduces risks, enabling better, more informed decision making in a quicker time frame. But in an age where technology enables lenders to do this, too many crucial decisions are still being made based on assumption rather than evidence.
Take for example, house price indices. The average index either provides a macroeconomic view of the UK housing market, or an overview of the regional landscape. What they don’t do is provide granular insight into local markets, which means lenders are unable to get a real-time view of what’s happening on the ground. Despite these shortcomings house price indices are still widely used for analysis of mortgage portfolios and other areas of decision making.
The expansion of new digital technologies means there are more accurate alternatives, such as more granular house price indexation or address level automated valuations. Local housing markets are driven by local economies and our UK Cities House Price Index is designed to showcase the sub-regional trends in house prices at a city level. The ability to take a more micro approach enables far greater accuracy and ensures that potential risks are more easily identified, which is crucial for any mortgage operation.
Digital disruptors
This strategy is underpinned by data-driven technology, in particular AVMs, which are increasingly being used by lenders to innovate and improve customer experience. Digital challenger bank, Atom, is relying upon the Hometrack AVM to expand the range of products available to customers following its launch in April. Its digital, mobile-only proposition means there is a natural synergy with a technology-driven approach.
If smaller lenders are to compete with bigger players and disrupt the market, then it is crucial they explore ways of improving the experience they offer to customers. Although AVMs vary in quality and capability depending on provider, the best in class offer a cost-effective, accurate and risk-proof enabler to drive innovation in the mortgage market. Regardless of whether lenders subscribe to technology evolution or revolution, the time for change and embracing new practices is here.
