Speaking to delegates, David Morris, head of homes at Santander, said the sector was going through a “very genuine moment of change”, naming four structural shifts in the market.
The first was climate change, Morris said, noting that loan to value (LTV) was currently the most effective determinant of risk, but it was likely that properties would start to be assessed on their endurance and adaptability
There would also be a reallocation of wealth, Morris added, with the risk of artificial intelligence (AI) replacing jobs raising the question of how professionals in the sector would know a borrower’s career was truly secure.
He went on to say that the digitisation of home buying would narrow the gap between maturity and remortgage, a simpler journey would make it “inevitable [that] the nature of advice will change”.
A digital home buying journey would result in faster completions, improved consumer confidence and, ultimately, transaction activity, Morris said.
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Additionally, upfront property information would bring decisions forward and make it likely that mortgage offers would be further embedded in the buying and selling process.
“You can see how that speculation then starts to be coupled with a more sophisticated origination and underwriting process, which creates something that feels more like the unsecured loan market. Something that’s straight through, something that’s immediate,” he noted.
He said this would also disrupt how product transfers and remortgages worked, as an “incredibly easy, slick, legal-free journey, then it starts to narrow the gap between maturity and remortgages”.
Morris said for a lender, this had “material impacts” on its economics, which could change how loyalty was measured, and engagement was driven.
The nature of advice will change
Morris said in his view, “it is inevitable that the nature of advice will change”, a direct consequence of the changes he mentioned and other factors.
He said new opportunities would be created for brokers and lenders, as if employment patterns and climate change made lending more complex, “you can immediately see where a trusted adviser becomes even more necessary”.
“Where talking through options, where structuring deals, where working with the lender becomes a really value-added process,” he added.
Morris said this was also where other needs, such as protection, would emerge as more important as the world in which our homes reside changes.
He said other changes, such as more sophisticated lending options, the growth of later life lending and complex products, would create more solutions that would “lend themselves to human conversations that require different skills”, in which brokers would thrive.
At the same time, “other parts of the market will shrink”, Morris said, adding that the “size of the more commoditised lending segments, which brokers currently address, will reduce” due to digitisation resulting in a straight-through market, potentially making that business “dis-intermediated”.
Holding onto the existing broker-lender relationship
Morris said technology would accelerate change and shift it even further, saying he did not think any industry would escape being impacted by AI.
“AI will change the advice journey,” Morris said, adding that this might happen in phases, firstly by enhancing the process and making it easier, then later shifting the boundaries and doing more of the “heavy lifting”.
“This leads to speculation that the human’s role shifts and becomes more one of oversight and engagement,” Morris said, saying this would be similar to the relationship between a paraplanner and solicitor.
This would scale, and the role of the broker would be more exaggerated, focusing more on value-add processes.
However, he said the sector needed to consider the potential of this change, as the same technology that could improve the advice process might also replace brokers.
“I think it’s actually inevitable that there will be an AI-driven alternative to the broker market,” Morris said, adding that it was difficult to say when that would happen or how far it would go, whether it would be for simple cases only or a mixture of simple and more complex transactions.
Morris said he really believed in the broker model and the idea of customers using “some company in the Silicon Valley to help provide advice on the biggest financial transaction of people’s lives” did not fit with its view as a lender.
Positively, he said customers still loved brokers, evident in Santander’s Broker Barometer, which recently found that six in 10 homeowners said they could not have navigated their home buying or remortgage journey without one.
Morris said there was “no debate here about whether or not brokers add value to the process”, adding it would be a “big own goal” to move away from the successful model lenders had built with brokers and “stumble into something to chase short-term economics, or because we don’t have the foresight to think about where this ends, or worse, we just forget that we have something that works really well today. That’s the human connections, the empathy and the creativity.”
He said the sector could sell itself better and show how well lenders and brokers worked together and show the model was something worth keeping. Morris said Santander wanted to continue backing the broker, and a coalition in the sector could be used to create a single voice that “pushes the solutions that work for all parties”. Finally, Morris said the sector needed to embrace change: “Lean into these opportunities, we have to engage with technology, we have to understand it, and critically then, we have to be very thoughtful about those solutions that we want to push”.
