We are already starting to the see the emergence of API-led solutions to service the broker market, while intermediaries will start ‘tooling-up’ and making greater use of the wide range of digital capabilities that are coming to the market, which will eventually bear significant fruit.
Digital services and technology are already having an impact. Eligibility and pre-qualification services are helping to create a more streamlined process, matching potential borrowers with the most suitable lenders based on their credit position and affordability. This has enhanced the efficiency of the entire mortgage journey.
Further to this, Open Banking will allow customers to share their transactional data digitally, giving lenders and intermediaries a more accurate picture of their expenditure and affordability profile.
The end point of this digitalisation journey is likely to be a ‘data partnership’ – the joining of the customer, the intermediary, and the lender based on the seamless flow of trusted data between all. These partnerships will be in their infancy this year, before likely becoming more established in 2021.
And of course, as in any healthy marketplace, competition to build upon the services should drive even more innovation, encouraging brokers to adopt these technologies to make sure they are one step ahead, or at least on par, with their competitors.
The wider market
A low interest rate environment has made it challenging for many lenders to generate healthy margins.
Indeed, there have been some notable casualties in 2019 because of this. As a result, in 2020, there is likely to be further consolidation at the prime end of the market as competition remains fierce when it comes to leading rates and the total cost of borrowing.
Because of this margin squeeze, it’s likely lenders will try to find other avenues to compete – for example on speed of service or criteria – with some lenders diversifying further into specialist portions of the market in search of a return.
Lenders heading down this road must take a measured approach in order to protect their books, with data insights helping to minimise risk and maximise upside.
On the consumer side, there will be continued interest in Help to Buy, ahead of its planned closure in March 2021.
We should also start to see the fruits of the much-welcomed action taken by the Financial Conduct Authority (FCA) in loosening affordability criteria for those ‘mortgage prisoners’ who have been unable to switch to a cheaper deal.
This will help to solve a substantial detriment which is estimated to have affected 500,000 customers – although it’s widely acknowledged that there is still a long way to go before we are able to fully close down that particular chapter of our industry’s story.
In 2020, the mortgage industry is set to continue its digital journey. The progress which has been made in a relatively short period of time has been significant and as these technologies continue to be introduced, improved and polished, all parties will feel the benefits this digitalisation can bring.