The sheer number of products available can make it difficult to compare deals and find the most suitable offer for them, something recognised by the Financial Conduct Authority (FCA) in its Mortgage Market Study interim report.
While it noted brokers’ experience and expertise, and that lenders offer a wide range of products meeting a variety of consumer’s needs, the regulator also pointed out several failings in the current market.
These include the difficulty borrowers often experience when changing mortgage providers and their inability to choose “on an informed basis” the right broker for them.
But chief among the FCA’s concerns is how challenging it is for some borrowers to pick the cheapest deal for them, due to the complexities of the mortgage market and application process.
On average, it says, these borrowers paid £550 more than they should have over the life of the introductory rate.
While market comparison and aggregators can help, more can be done by lenders to simplify the process and drive clarity.
The FCA said: “We want to explore with lenders, intermediaries and mortgage sourcing system providers how the market could develop tools that make it easier for consumers to identify at an early stage those products for which they qualify.”
One approach, the regulator suggested, would be for lenders to make their mortgage acceptance criteria known to other market participants at an early stage.
This would not only help brokers, but also allow for the creation of new tools to aid borrowers, it argued.
Lenders are already increasing investment in improving the customer experience through technology and more automated processes.
This has been hastened by low interest rates, the highly competitive nature of the market at present, and initiatives such as Open Banking.
We believe lenders can go further and be more proactive in establishing mortgage eligibility among their wider customer base by adopting services such as AVMs.
By determining the value of a borrower’s property and the capital they have available it allows lenders to design and offer tailored products, including personalised rates, fees and length of the deal for each loan applicant, depending on their needs and circumstances.
Offering that level of personalisation to their lending proposition gives banks and building societies the chance to build customer relationships that can last a lifetime.