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Hinckley and Rugby BS warns oversupply of money a danger to risk-based pricing

  • 29/05/2019
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Hinckley and Rugby BS warns oversupply of money a danger to risk-based pricing
Hinckley and Rugby Building Society has warned that the vast supply of money available for lending could drive the mortgage market into a “horrible place”.


The lender also highlighted that it was unlikely it would be able to compete with big lender’s pricing and their processing power in the vanilla market.

But it was positive that the vast majority of borrowers will continue to want to use an adviser during their mortgage application despite moves to open up the market to more direct sales.


Danger from big supply of money

Speaking at the Building Societies Association annual conference last week, Hinckley and Rugby BS chief customer officer Dean Waddingham noted that as technology improved, so mortgage products will get more complicated, rather than simpler.

“There will potentially be a plain vanilla market that will see applications go straight through – you’ve got ring fenced banks that will say yes and we won’t be able to compete with that,” he said.

“Then you’ll get all sorts of nuances away from there – different level of complexity, different risk models.

“And of course at the moment there’s a big supply of money, there’s a danger we do all drive for price and don’t start risk pricing anymore and that could end up in a horrible place.”


Vast majority will want advice

Discussing the market’s evolution with a panel of brokers and technology providers, Waddingham believed advice would still be the main route for mortgage borrowers.

“It’s interesting how the market will change. There will be niches of people who want to go direct and want to use that type of advice,” he said.

“There will be people who want to go through intermediated robo-advice. I still think the vast majority will still want an intermediary supporting them in there.

“And for a relatively small building society such as us, very small niches within the market could still be quite sizeable compared to our balance sheet, so it could still be worth us going for them.

“But I think in terms of the overall market, it’s going to be intermediated advice,” he added.


Open Banking not top of the list

Open Banking has also proved an increasingly positive development as it is rolled-out.

According to the Iress research released last week, 96 per cent of the lenders surveyed saw Open Banking as being beneficial to the mortgage process, sharply up from last year.

Waddingham confirmed the Open Banking had possibilities but said the lender was restricted in where it could invest.

“I can see advantages, it would be good to do, it would help with the underwriting and so on,” he said.

“But in reality we’ve only got so much resources and change capability, and is it top of our list right now? No.”


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