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. 

Digital 2020 

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. 

Proposition is the mainly digitally-focused link between distribution and head office ensuring MAB advisers receive the best technology solutions regardless of business model, said MAB, adding that customer acquisition and nurture remain MAB’s focus.

Peter Brodnicki, CEO, at AIM-listed mortgage advice firm MAB said how delighted he is Lowndes is joining the team, adding: “We build our own technology, we have significant resource, and it’s in our DNA but the winners in tech won’t replace brokers but instead make them a clear and compelling choice regardless of the simplicity or complexity of the transaction or the experience and confidence of the consumer.”

He added: “The proposition team is tasked to ensure MAB’s digital capabilities reflect the requirements and ambition of our distribution, our customers, and our lead sources. Matt drove the technology agenda at Coreco, and like MAB, sees the endless benefits that rapidly evolving technology can bring to the intermediary sector and the customer experience.

“Matt is another exciting addition to our team and will help bring our distribution even closer to our highly innovative in-house tech team, leveraging the ideas and expertise of both,” he added.

The Coreco years

Lowndes stepped back from Houndsditch-based London broker Coreco in July after 10 years at the company, with fellow director Andrew Montlake stepping into the role.

Montlake said: “Matt will always be a close friend of mine, Jules and Coreco. We of course wish him all the best in his new role and are sure he will make a real difference to MAB.”

Since 2009, Coreco has grown from a small start-up, to a company of over 50 people and 32 registered individuals. The firm advises on almost £1bn worth of mortgages annually and is now led by Montlake and Julian Ingall, head of the specialist finance division.

Lowndes retains a shareholding in Coreco and also plans to begin an Open University course in data management in his spare time in October.

Lowndes said: “I am excited to take this next step of my journey with a forward-looking and highly innovative company like MAB. It was always important to me that I would be pushed, challenged and expand my knowledge in my next role, and after speaking with Peter and Ben I know that this will be the case. I have known them both a long time and it quickly became clear that this was the challenge I needed.

“This role will give me the opportunity to be able to help deliver innovative solutions that improve both the client and adviser journey. I think I can make a difference and I am absolutely delighted to be joining MAB and can’t wait to get started

“I always said I wanted to ensure my next adventure wouldn’t be boring and this will be far from that.”

The high street bank has launched a pilot enabling customers to do their banking by talking to the Google Assistant on their Google Home smart speaker or smartphone.

Customers will be able to ask for commonly requested details such as their account balance and recent transactions, and will be given a verbal response. On smartphones, the information will also appear on screen.

Where customers are unable to get an answer or need to speak to someone, a message will be sent to their phone with contact details of NatWest’s customer helpline.

Testing phase

The initial three-month pilot, involving 500 customers, lets account holders ask eight questions as well as accessing more than 15 banking tips, with the potential for more to be developed if the trial is successful.

For security reasons, customers will setup their voice banking with their existing online banking password and PIN. When accessing it, customers will then be asked to provide a partial voice PIN to confirm their identity.

Some experts predict that voice banking could follow the same path as mobile banking – moving from a niche way for people to manage their finances into a mainstream method to bank. Currently, 9.6 million people in the UK own a smart speaker, a figure set to rise to 12.6m this year, while about 55m own a smartphone.

One of the key benefits of voice banking is that it allows customers to multi-task enabling them to do their banking whilst completing other tasks. The more human interface could encourage customers who don’t use online or their mobile phone to bank in a whole new way.

There are also advantages for blind customers making it easier to complete tasks without the use of a screen or keyboard.

Kristen Bennie, head of open experience, NatWest, said: “We are exploring voice banking for the first time and think it could mark the beginning of a major change to how customers manage their finances in the same way mobile banking made a huge impact.

“This technology will make it easier for people to bank with us and could bring particular benefits to those who have a disability as voice banking eliminates the need for customers to use a screen or keyboard. This is one of a number of services that the bank is aiming to develop this year that uses cutting edge, innovative technology to better serve our customers.”

It launched its internal business network Interact, in partnership with Work.by Design, in a bid to help its people ‘build confidence and start different conversations.’

The scheme offers a combination of seminars, networking, elearning and coaching across the Equifax UK offices, with a particular focus on helping women progress to senior roles.

It builds on existing employee training, well being and inclusion projects at Equifax in recognition that the firm’s people are its biggest asset.

Beth Whelan, head of collections and recoveries products at Equifax, said: “We recognise that employee well being and equal opportunities are vital to the success of our people and the company as a whole. The programme is the latest part of our strategy to support colleagues in their confidence and development at work.”

Claire Dunn, co-founder at Work.by Design, said: “We’ve created a programme of work for Equifax that supports its Women in Finance Charter pledge to have equal numbers of female and male senior leaders by 2023. Paying particular focus to the needs and support of women in the organisation, we aim to disrupt the status quo of traditional coaching and mentoring programmes. The Equifax team has been really receptive to the themes and we look forward to working with them over the coming years.”

Signatories to the Women in Finance charter aim to promote gender diversity by offering accountability for gender diversity and inclusion and sponsoring senior leadership. The scheme asks companies to set internal targets for gender diversity in senior management positions and publish progress against these targets. It also encourages firms to ensure the pay of senior executives is linked to delivery of these targets.

Equifax is headquartered in Atlanta, Georgia, US, traded on the New York Stock Exchange and operates in 24 countries including the UK.

Mortgage completions fell to £1.7bn in the first half, against £2.1bn the previous year, which the bank attributed to a ‘controlled level of growth’ amid margin pressure caused by the expiry of historically higher fixed rates and low numbers of borrowers on standard variable rates (SVR).

Net residential lending fell from £0.5bn to £0.4bn, however customer retention has improved overall, said the provider.

Co-operative Bank was the 12th largest UK lender over 2018, according to UK Finance figures, with £4.3bn of lending lifting it two places in the rankings and placing it just below TSB at 11 with £4.8bn and above Metro Bank at £4.2bn.

Channel updates

In H1, online mortgage product switching has been added for existing direct or intermediary customers and also made available to buy-to-let customers who arrange their mortgages direct.

The bank has also reduced the application to offer time on the Platform website by 16 per cent in six months.

On Co-op’s mortgage lending, 99.7 per cent of the total book is classified as prime or buy-to-let mortgages, with higher risk self-certified, almost prime and non-conforming accounting for 0.3 per cent of the total book.

CEO Andrew Bester said: “We have made a positive start to the year, and while we remain loss-making overall, the reported statutory loss before tax of £38.5m is ahead of expectations with the group being near break-even on an underlying basis, with a £2.8m loss.”

On the IT and digital side, the lender continues to separate its infrastructure from the group which it said will better enable product development and the group migrated 350,000 current account customers to its mobile app.

The turnaround strategy

The group reported a 5.8 per cent lower net interest income in core segments to £159.4m year-on-year.

The report said: “This continues the trend reported at the year end, where compression of retail mortgage margins is being experienced by UK lenders across the market which is only partially offset by reduced funding costs.

It added: “During the same period, operating costs have increased by 4.9 per cent, leading to an increase in the underlying cost:income ratio from 95.7 per cent to 101.0 per cent.

“This reflects the group’s planned investment to reinvigorate and energise its brand and in its people as part of the strategy to build the future of the bank.”

The 10 projects include the use of biometrics to speed up airport passenger journeys, innovations in crime prevention and technological advances in the health sector. 

Other products and services which will be tested and scrutinised for compliance with data protection law will include innovations in housing, road traffic management, student welfare and tackling bias in artificial intelligence. 

FutureFlow, Greater London Authority, Heathrow Airport Ltd, Jisc, NHS Digital, Onfido, Tonic Analytics and TrustElevate were the other nine projects chosen from the 64 applicants. 

A spokesperson for MHCLG said its project sought to create a dataset that would allow MHCLG to “understand more about the private rented sector in Blackpool, who lives there, and how [it] can help improve the quality of properties.”

Playing in the sandbox

The sandbox is a new ICO service which will support organisations developing innovative products and services using personal data with a clear public benefit. Participants will be able to draw on the body’s expertise and advice on data protection by design, mitigating any risks as they test innovations, while ensuring appropriate protections and safeguards are in place. 

Elizabeth Denham, information commissioner, said: “The ICO supports innovation in technology and exciting new uses of data, while ensuring that people’s privacy and legal rights are protected. We have always said that privacy and innovation are not mutually exclusive and there doesn’t need to be an either-or choice between the two. 

“The sandbox will help companies and public bodies deliver new products and services of real benefit to the public, with assurance that they have tackled built-in data protection at the outset.” 

“Engaging with businesses and innovators in the sandbox is also a valuable exercise in horizon scanning – the ICO can identify new developments in technology and innovation and the potential opportunities and challenges they may provide,” she added. 

The next stage of the process will be to agree and develop detailed plans for each participant before work starts on testing products and services. It is expected that all participants will have exited the sandbox by September 2020. 

Backed by venture capital firm Verso Capital the mortgage, bridging and secured loan sourcing technology will be integrated into St. James’s Place back office system.

Twenty7Tec said more than 4,000 wealth management advisers can access the system. Although not all are mortgage broking, they are already completing £5bn to 6bn of mortgages a year.

SJP and Twenty7Tec have signed a ‘multi-year agreement,’ with a view to further strengthening the mortgage systems offering for SJP Partners.

James Tucker, CEO of Twenty7Tec, commented: “To be selected by such a prestigious organisation as SJP, is testament to the strength of the proposition in both sourcing and application submission that our team have developed. We look forward to working with SJP and their partners through 2019 and beyond.”

Paul Emery, head of client banking at St. James’s Place, added: “MortgageSource is a leading solution that will enable us to deliver a step-change in efficiency and productivity, making life simpler for our partners and allowing them to spend more time advising clients.

“The solution allows us to meet the changing requirements of the mortgage market and underscores our commitment to holistic financial advice for our clients.”

Mortgage Source

The software has over 10,000 ‘active users’ defined as logging in more than once in the past 12 months, completing just over £100bn of mortgages from January to December last year.

Twenty7Tec told Mortgage Solutions it is engaged in more than 10 other integrations, which will come to fruition by Q1 2020.

In February last year, Twenty7Tec confirmed investment from Skipton Building Society-owned property and finance giant Connells.

At the time, Sesame Bankhall Group confirmed it will also roll the two Twenty7Tec systems out to its advisers, but PMS, however, stated that Mortgage Brain remains its ‘preferred system’ but will offer the alternative software to users for £10 a month. LSL has agreed a similar deal for its 2,000 advisers, with rollout due to complete by 2019-end.

Christopher Woolard, executive director of strategy and competition at the FCA, said it was too early to comment on the success or failure of Open Banking, but confirmed 100 providers were now involved from January this year.

During his speech ‘The Future of regulation: AI for human good’ delivered at the Alan Turing Institute today, he added: “Exciting though innovations like Open Banking are, they don’t exist in a vacuum. Technology relies on public trust and a willingness to use it. The public needs to see the value data can create for them.

“The Facebook-Cambridge Analytica incident last year struck a heavy blow against consumer trust in data sharing, that is still playing out.”

Yesterday, Facebook was hit with the largest ever fine to be imposed of $5bn by the US Federal Trade Commission against a tech company, after the personal details of 50m people were harvested by Cambridge Analytica.

Woolard said a key determinant of future competition will be whether data is used in the interests of consumers or used by firms to extract more value for the business from those consumers.

“As the market in data grows and machine learning continues to develop, firms will find themselves increasingly armed with information and may be tempted into anti-competitive behaviours,” he warned.

He said: “At a basic level, firms using this technology must keep one key question in mind, not just ‘is this legal?’ but ‘is this morally right?’”.

Leon Rees, a chief technology officer and spokesman for digital strategy at NatWest, said: “We see that using Application Programming Interfaces (APIs) and data science will deliver better sourcing, better full mortgage applications, better decisions in principles (DIPs), better calculators, and most importantly on the data science side, better products.”

He added that APIs and data science will avoid broker integration with lenders’ portals and allow the lender to ‘come into your process.’

Rees explained the high street bank’s broker-focused digital plans at a Local Broker Insight event held at the Bishopsgate Institute in London last week.

Complete transformation

Rees said everyone is aware that APIs are a channel but added that a transformational conduit breaks down information into the best journey for the customer and NatWest’s APIs are already in testing phase on a timeline.

He confirmed eight APIs will be in production from the end of the year with the document uploads and process improvement APIs expected out in 2020.

Brokers keen to test them out can ask for them, take a look and ‘start to play with them’ if they choose.

He added: “If you can sit down with the customer and say okay, I’ve got a NatWest API that has shown me your property and mortgage information, I’ve got a NatWest API that has shown me which of your sub-accounts are eligible to switch, I’ve done some sourcing and I’ve pulled that into a journey as well, you can provide a much better experience for the customer,” he added.

As a bank, NatWest is scanning other parts of the market and seeing other channels building these journeys and wants to make sure it can offer this technology and interact with other parts of the ‘mortgage ecosystem.’

The lightbulb comparison

Rees said APIs are like lightbulbs in that there are two formats which never change – screw and bayonet – despite the market evolving substantially.

This way, he said the bank plans to build a raft of APIs with different functions – DIP, scorecard, faster eligibility response and brokers will be able to plug into these and create a better customer journey.

“We’re going to combine this DIP with some other stuff, we’re going to write a companion app for our customers and we’re going to use the NatWest DIP to get that done,” he added.

Rees confirmed the bank is working alongside the sourcing systems Twenty7Tec and Mortgage Brain to deliver these functions to brokers.

Rees explained simplifying the document upload process is next, but the lender is getting ready to offer larger brokers partnership tools for the consumer.

“If you’re a large broker and you want to get really close to your customer and start integrating further up in their home-buying journey, we will give you access to our ability to verify income and expenditure, we will give you access to our ability to validate ID and we will give you access to our valuation engines for property as well.”

The bank continues to develop and test its customer analytics processes, which will eventually dovetail into broker Customer Relationship Management (CRM) systems.

This analysis will be used to assess customer affordability and where customers are at the edge of perceived risk, unearth better ways to assess them, said Rees.

He suggested the bank is keen to move to a data sharing place where brokers can use the APIs and understand how loans and customers perform to better inform the advice process.

Rees summarised that in essence, the bank wanted to remove bad process, optimise broker tools and give advisers back their time so they can deepen and broaden the customer experience.

The company, which has an operations team of 45, said the move will bring “much-needed innovation” to the buy-to-let market, which has faced “heavy restrictions and punitive charges” in recent years.

Habito would not reveal the identity of its funding partner but said it is in talks with a range of pension, investment and insurance houses interested in a mortgage market launch, as well as traditional retail mortgage lenders keen to explore the benefits of ‘the new rails for mortgage products’ the platform has built.

Habito confirmed the full lending journey happens on its side before handing over to its fully-Application Programming Interface equipt (API) servicing partner, Pepper UK.

Speaking to Mortgage Solutions, Daniel Hegarty, founder and CEO of Habito, said: “The traditional lender’s response has been very positive. They see us as a good place to test new product lines. We are trying to be the rising tide and help the wider market to innovate.”

Hegarty said the platform is competing with price comparison websites for its customers attention and said the firm is ‘augmenting the market, filling in the bits the market doesn’t want to lend to,’ for example, high loan to value buy to let.

The proposition

The platform aims to offer customers a mortgage deal within 10 or 11 days. It will replace what it termed the “inflexible and outdated” Decision in Principle with the ‘Habito Instant Decision’, which it says will involve deeper checks at the outset including a soft credit search, an automated valuation and 100 Know Your Customer checks in real-time, guaranteeing greater certainty and speed.

The first 15 – 20 customers placed after the go-live at 8 a.m this morning will get 2.5% cashback.

The new range includes 2, 3- and 5-year fixed deals as well as 7-year and 10-year fixes, aimed at longer-term investors, with rates starting from 2.59 per cent for a two-year fix.

The cheapest 10-year fixed deals start from 3.51 per cent, while 7-year deals start from 3.31 per cent.

No minimum income is required for first-time landlords up to 75 per cent LTV and there are no minimum value or maximum LTV restrictions for ex-local authority flats

Applicants will need to show three months of income although self-employed customers will need two years’ proof of income.

Hegarty said: “We exist to free people from the hell of getting a mortgage. For buy-to-let landlords, hell means long waits, inflexible eligibility criteria and application decision uncertainty.

“We’re proud to bring to market a range of products that have been built with landlords in mind: long-term fixed rates, competitive pricing, low deposits and sympathetic to self-employed and older customers. We guarantee certainty and speed to offer. It’s the next generation of mortgages.”

Customers will only be able to access the products via the Habito Brokerage.

The launch will be supported by TV advertising and a targeted buy-to-let campaign aimed at landlords from next week.

The firm plans to launch company buy-to let and portfolio landlord mortgages later this year and a range of residential mortgages in the coming months.