TSB’s gross mortgage lending fell by a third last year to £4.8bn, down from £7bn the previous year after the bank was forced to reduce new lending in the second and third quarters due to IT failures.
However, applications increased by 142 per cent in the fourth quarter compared to the previous three months and the bank said it was entering 2019 with a strong completion pipeline.
TSB apologised to mortgage brokers in November last year for its delayed introduction of product transfer fees as IT resource had been drawn off to cope with the emergency.
But Roland McCormack, mortgage intermediary director at TSB said: “I wrote to brokers, kept them up to date and gave them the opportunity to email or ring me and a lot of them did and quite rightly shared their frustrations.”
However, the launch in November went well he says and TSB has done more than £600m of product transfers (PTs) since then.
He added: “And we continue to get rave reviews from brokers because our system has reduced [the duration of] a PT to two minutes. Also, we put no barriers in the way of a customer doing a PT with us, whether interest-only or in arrears – any customer gets a product transfer.”
I ask McCormack how the bank decides on which strand of work to prioritise on the mortgage side, with lender updates, broker updates, third party connectivity and so on all 15 years ‘overdue’ in McCormack’s own words.
He replies that TSB’s new system, Mortgage Pro, allows the lender to launch far more flexible products including product transfers, free valuations on purchase and cashback instead of free legals and these changes had to be phase one.
Phase two will be all about connectivity with the broker, with end-to-end connectivity in TSB’s sights.
TSB is prioritising intermediary distribution over branch because of the sheer volume of business coming through the broker channel. McCormack added he is not seeing ‘anything’ telling the bank it needs an execution-only digital service, other than in the product transfer space where customers can switch up to three months before the end date and choose the route they want to take.
“We pay 30 bps to brokers, so the customer can decide,” said McCormack.
When asked if there is anything showing that customers are keen to buy a mortgage in two minutes with no advice on an aggregator site, McCormack says no.
“If we step back you have to look at the problem it’s solving. Customers have plenty of choice of channel and predominantly they use intermediaries. They go to advisers for local relationships, to shop around for the best mortgages, we have very competitive products and great customer outcomes so people are getting great quality advice.
“So, how does migrating everything online create a better deal for customers?” he asks.
He also says the other key factors so often missed are the complexity of the mortgage process for customers and the heavy-lifting done by brokers to get deals done by whatever means necessary in a shorter space of time.
Potential for lender collaboration
In this era of shared problems and individual technology solutions, I ask McCormack if he’s been invited to a technology forum or to ideas share to move industry collaboration onwards?
Not yet, he says smiling. “The challenge of doing that is that its complicated producing a technology solution for one lender, for example the common application form. Actually, it’ll be about 92-pages. Because everyone wants something different.
“I just think it’s very difficult to get 22 lenders to agree on anything,” he adds.
“Instead we have some good technology companies who have got to come up with some good solutions and our job is to facilitate the link between broker and ourselves and provide a good product. There’s no point us telling brokers how to do business with us.”
TSB took on another 500 directly authorised (DA) brokers from December to January, alongside some additional networks and that distribution reach to more DAs will continue to widen throughout the year.
The bank has also become the new sole sponsor of the Association of Mortgage Intermediaries (AMI) annual dinner as a ‘mark of respect’ to the work AMI CEO Robert Sinclair and the trade body undertake.
The lender has broadened its product range in recent weeks with a buy-to-let product with no early redemption charge offering flexibility, with other things in the pipeline, including free legals and cashback, says McCormack.
The banks plans to serve more of the market with self-employed and contractor mortgages and a large loan proposition, which means it has lifting its income cap to 4.7 x, which will make TSB’s products more appealing in the capital.
Our speed to market has gone from 18 months to a couple of weeks with the new Mortgage Pro mortgage architecture, he adds.
The third key strand for this year will be leveraging technology, says McCormack, and the end-to-end mortgage process for brokers.
“We have already announced our partnership with Twenty7Tec and there are other parties we are working with. We are working on how we can slim down and cut the mortgage journey.
“Pressure points can still be addressed – lots of little things which can be automated, so using Automated Valuation Models more widely, for example, and many more could take as much as five or six days out of the process.”
Further digital partnerships
It seems the beauty parade of potential technology partnerships continues apace with plenty of meetings still ongoing and TSB will announce further relationships in the coming weeks.
“We think there will be a minimum of two good suppliers in this market, potentially a couple more, and that’s good for all of us as no-one wants to have one supplier doing the links.”
He added: “Many of the things I’ve been presented look great on a Powerpoint, but had little substance behind them. The danger is that we try to design the ‘all singing, all dancing end game’, but there is actually really good stuff that can be done relatively quickly. Instead, let’s get something out there that helps brokers and our customers and let’s learn and build on it?”
So when will brokers at the coalface start to see mortgage processing times fall and real change, I ask.
“My expectation is that a significant part of the lending industry will have linked to brokers by March 2020. What I’m not seeing is [lenders] paying lip service – Fear Of Missing Out (FOMO) is very real. It’s happening. It’s probably 15 years late, but the theory is that this will create huge value for brokers,” he adds.
“It’ll create huge amounts of efficiency, not just avoiding re-keying, or mistakes made through re-keying…technology will create one version of the truth and will also make compliance a lot simpler.”