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‘Crowd-designed’ mortgage would be faster and more flexible on payment ‒ analysis

  • 16/08/2019
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Intermediaries have suggested that a mortgage designed by their clients would offer borrowers more flexibility over how to adjust their payments, as well as faster processes to reduce stress among buyers.


This week Tandem Bank announced it was developing a crowd-designed mortgage, with the aim of using input from potential borrowers in order to create a product, or product range, that delivers what borrowers really want.

Ricky Knox, chief executive officer of the bank, explained: “We’re once again turning to our community to shape a new financial product, this time a crowd-designed mortgage.

“Many people feel like they’re priced out of the housing market or don’t have the credit record to get a favourable mortgage. We plan to address that.”



Make things faster ‒ and cheaper

Richard Hayes, chief executive of Mojo Mortgages, said clients would likely want any mortgage to not only be cheaper, but also much faster to put in place.

He explained: “The reality is the entire sector is working towards achieving those goals while also offering customers greater flexibility and choice, but a reduction in time and upfront costs come up time and time again.”

Hayes added that speed is particularly important in a competitive market as it improves the chances of a borrower landing the property, so a quicker process “could also have a positive impact on a customer’s anxiety levels”.

“Designing a product that allows for much faster completions would definitely be top of many of our customers’ wish list.”


Upping regular repayments

James Mole, managing director of London Belgravia Wealth Management (LBWM), said his clients would like to have an easier way of taking control over just how much they pay towards their mortgage each month.

He said: “I think clients would like to be able to control their payments more easily. I think most would like to be able to up their regular payments without having to ring up the lender.”

Hayes noted that clients were likely to want to see a more inventive attitude towards products that help first-time buyers get onto the market.

He added: “Borrowers would definitely want more innovation around the shared ownership section of the market, especially as we head towards the end of the Help to Buy scheme.”


End to the SVR payment shock

Perhaps unsurprisingly, brokers believe products designed by borrowers would be less likely to incorporate a dramatic increase in the interest rate at the end of the initial fixed or variable period.

As Mole put it “doubling the interest rate when the initial deal expires… just seems like a cash grab”.


True cost transparency

Dilpreet Bhagrath, customer experience manager at Trussle, added that in an outdated industry driven by legacy systems and unsuitable products, this was a progressive move.

And given the opportunity to design a product, Bhagrath noted that a focus on transparency would be vital.

“There’d be no limits on overpayments, giving greater flexibility and the option for customers to repay their mortgage more quickly and without penalties,” she said.

“We’d make sure that product transfers are as competitive as new customer deals with borrowers not stung by the loyalty penalty.

“And all our mortgage products would clearly display the true cost. This means that the customer will know exactly how much they’ll pay over the initial term, taking into account any fees and incentives, in addition to the interest cost of the mortgage.”


Do we need a crowdfunded mortgage?

However, there was also some scepticism about the idea of a crowdfunded mortgage delivering anything particularly different.

LBWM’s Mole argued there were not really any particular areas not already addressed by lenders.

He said: “There is normally a lender that suits every client, it’s just that research needs to be undertaken and many people still don’t take the time to do this.”


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