The UK has been on an ‘AVM journey’ for some time now, but every user is running their own race, working out the best way to use AVM technology to benefit their own business. Combining advanced predictive modelling, UK-wide data and industry expertise has allowed lenders to instantly value residential property, driving lower costs, better digital journeys and a faster time to yes.
But when and how do lenders optimise this capability and where does heartfelt human expertise run against the grain of what data can tell us?
Just starting out
Let’s start with Lender A – a business starting with limited automation, which initially underestimated just how critical accuracy and reliability is to the mortgage process. This would result in missing the key opportunities that lie in small increases in performance, which trigger large increases in benefits. For this lender just starting on its digital journey, it is not easy to appreciate that technology is only as good as its ability to adapt.
Tracking, adapting and predicting the impact of those changes in a timely manner – from Covid lockdowns to regional or national recessions – will greatly impact Lender A’s bottom line. It is now seeing firsthand that automation is delivering new levels of accuracy and reliability, specifically tuned to their stated risk appetite and loss rates.
Playing catch up
Lenders who previously held back from adopting AVMs are now having to jump into automation, as they are generally finding it harder to compete. With lengthier processing times, coupled with lower levels of customer success and conversation rates, the customer can simply choose to go elsewhere.
Yet we’ve seen late adopters really accelerate in their usage of AVMs in order to level the playing field.
For Lender B, in the middle of the pack, knowing that AVMs for remortgage and purchase are now commonplace made it easy to also spot the extra complexity of technologies surrounding buy-to-let mortgages.
Typically, these lenders have also come late to the party, largely because they come from more complex areas of the industry or emerging sectors such as later life lending. Whilst their usage is different, they continue to ask demanding questions and encourage the technology to do more than just accurately value the property.
This lender believes it understands why it shouldn’t implement the AVM, believing that complex products, niche markets and high loan to values (LTVs) would all be problematic.
Yet, a property has capital value whether it’s rented or not. When put to the test against their real data, buy-to-let AVMs performed remarkably similarly to other models on both capital and rental values; meeting and surpassing all the security and risk analytics that their existing models demanded.
This lender is now beginning to see the benefits beyond the traditional AVM, pushing it more widely across its business and capabilities.
Ahead of the game
Lender C is leading the pack and already seeing the benefits of the AVM.
With automation in place across its business and with new horizons to explore, its questions are not simply about the benefits of AVMs, but unlocking more digital data and the benefits that could bring, pushing it further ahead of competitors.
Exploiting newly available digital valuation models, with machine learning that dives deep into areas traditional AVMs cannot succeed in, the lender has been able to uplift its automation and accelerate thousands of consumer journeys, bringing new step-changes to their investments and value.
Such early adopters of AVMs often find themselves at the forefront of more complex products such as buy to let and higher loan-to-values. As such, their use of AVMs comes with a huge amount of scrutiny and risk analytics. These market leaders are asking even more questions of digital data, as they look to unlock more certainty and performance in the AVM, while continuing to shift the goalposts for competitors.
In truth, those that have been in the industry for long enough will know that it can never be a one-size-fits-all approach. Lenders – no matter their size – are all at different stages of the journey to establish AVM technology as a core part of their business model.
To quote Thomas Redman of Bell Labs; “Where there is data smoke, there is business fire”, and – whether it be winter or summer – we all like to be warm.
