This is especially so when it comes to the march of fintech or proptech and how this might intertwine with the provision of mortgages.
The government’s own Call for Evidence on the home-buying process includes mortgages and lending, with Matt Prior of the Department of Communities and Local Government (DCLG) announcing that the government is minded to encourage buyers to seek out a mortgage decision-in-principle (DIP) prior to them putting an offer in on a property.
This is part of the move towards greater certainty in the home-buying process and ensuring that the number of transactions that currently fail each year – 30% in the UK – falls significantly.
One of the reasons transactions might not happen is because the prospective buyer has not sorted their finance out prior to making the offer; it’s only later on that they find they cannot secure the mortgage they wanted, or the right loan amount, and thus that offer cannot be taken forward.
It’s essentially a waste of time for all concerned and the government seems keen to put an end to this.
Binging offers to lend
Our own focus has been on the provision of binding offers to lend, and again this feeds into advisers creating DIPs prior to an offer to purchase being made, which again shows to the vendor that the buyer is serious and that they have the financial means to back their offer up.
It seems to us that the DCLG is not so keen to mandate such solutions – it would appear it wants the industry to provide this off its own bat – but I would not be surprised to see new rules introduced if this does not become an ‘industry norm’.
Perhaps of even further interest to advisers, is the next step in terms of what HM Land Registry (HMLR) wants to achieve.
You might not be aware, but earlier this year, HMLR produced three proof of concepts which are designed to take house purchase onto the next level, and are designed to dovetail into the work it’s doing to have all property registered by 2030, and its Digital Street project.
One of those three proof of concepts, is entitled Instant Mortgage and it’s a consumer portal which takes the DIP before a property offer one step further, in that consumers will (theoretically) be able to use a platform to conduct all their housing transaction needs, one of which would provide an instant decision on lending.
To my mind, this presented some considerable challenges not least to advisers because the Land Registry model seemed to have mortgages, products, and lenders presented directly to the consumer via this platform, with seemingly no advice option.
This looked like a form of ‘robo advice without the advice’ with the programme working off the individuals’ financial details – via Open Banking – and then presenting product choices based on their financials.
Where’s the advice?
A type of sourcing system you might say and one could see the allure for this direct-to-consumer offering from the banks – not least because it would cut down on the payment of procuration fees.
But one might question at what point any advice was being given, who is responsible for the presentation of such products, and what recourse consumers might have if they end up making the wrong product choice.
It would certainly be something to explore with Land Registry as they start to pilot this, and given that its ‘Property Adviser’ proof of concept could be construed as taking away much of the conveyancer’s current role, one might wonder how such propositions are likely to impact on other stakeholders’ role in the property and mortgage process.
There are some big leaps being made here and, without industry feedback, one can see some large, long-term consequences.