Some estimates put the gap between the number of DIPs going through to full completion at as much as 50-60%.
We asked this week’s Marketwatch panel why more DIPs don’t go through to completion and what could be done to close the gap.
Whilst the 50% DIP to completion figure may seem low, it could be misleading, and therefore understanding how to improve this for all in the chain needs more granular detail.
There are many dynamics in the process, so we need to understand where the biggest gap is – is it DIP to application, application to offer, or offer to completion?
Much work has been carried out between brokers, distributors and lenders in relation to the application to offer stage.
Ensuring correct documentation at the correct time is key. Many lenders now allow this to be uploaded to the application, negating lost documents.
We offer members a section on our website under ‘Speed to Offer’ that helps them navigate the plethora of lenders’ documentation nuances.
There is still the challenge of broken chains and down valuations, but I believe that the percentages are very high in this area.
DIP to application is still work in progress. Point one is understanding the lender’s criteria.
We’re making steady headway with the introduction of new systems like Knowledge Bank and CriteriaHub helping brokers to choose the correct lenders.
Lenders can still play a bigger part in this by having clear, easy to find criteria outlined on their websites.
The final point is around lenders engaging in a positive way with brokers where there is an ‘accept’ decision, but no application follows.
There could be many reasons but, by being consultative, they may be able to help improve the understanding and make positive changes to help all.
As a lender we are constantly looking at ways to improve customer engagement, whether direct or through intermediary partners, and streamline the mortgage journey.
The application process is a vital link in this chain and from the first touch-point – the decision in principle (DIP) – through to completion; there remain significant improvements to be made.
Internal research from Barclay’s shows that 25% of DIPs received don’t lead to a full application, and only 60% convert to completion.
One of the main reasons for this is the difference in quality in terms of how cases are packaged and by whom.
There is currently a 13-day variance in the time to offer between different brokers, with the best in class coming in at eight days and slowest at 21 days.
So how can these times be improved?
The industry is already working hard to reduce physical valuations using data driven automation but more could be done to refine valuation methods and speed up this journey.
Only 30% of cases are fully packaged correctly at submission with the top three packaging defects being a lack of bank statements with salary credit shown, the latest payslips, and signed trading accounts.
Moving forward, technology can certainly help improve the application process but, no matter how sophisticated lenders systems are, the key to a smoother passage is ensuring that all initial data sent by intermediaries is correct, with all the required documents correctly packaged and sent in one go.
However, with intermediaries having to adhere to different policies and working with several lenders at a time this isn’t always easy.
This means lenders also have to be held accountable for making criteria and systems as simple to use as possible, and we must work harder to educate and support intermediary firms of all shapes and sizes to help them get the application process right first time.
We have already implemented a number of policy changes this year to make it easier for intermediary partners to do business with us.
And, with plans to remove requests for over 180,000 pieces of documentation in the coming year, we realise this is an ongoing challenge for all lenders.
Whether a DIP progresses to completion is likely to depend on what stage of the homebuying process it is carried out.
Some brokers may well be too quick off the mark to DIP clients, when in reality they may not be in a position to buy for a number of months.
So much can happen in that time frame and the chances of that DIP then being converted to a full application is remote.
The subject of when to proceed with a DIP is an interesting one; do you undertake a DIP for all clients or are you more selective?
Without a doubt I am in the latter camp and can honestly say I rarely obtain an DIP until a client has had an offer agreed on a property and they are ready to move forward.
I accept that a good proportion of my clients are young or established professionals with an excellent credit record and reasonable deposit to boot.
For these reasons, I have numerous lenders that would wish to lend.
Therefore, I don’t see a requirement to undertake an DIP with ‘lender A’ to then only choose ‘lender B’ further down the road when the client has found a property and is ready to proceed.
On the other hand, if I am concerned about a client’s credit record, or I may have very few lender options due to a client’s circumstances then from time to time, I will obtain an DIP at the earliest opportunity to give both the client and myself some peace of mind.
From a lenders’ viewpoint, they’re in a fairly difficult position.
More are now only leaving a soft footprint on a credit file, which is to be applauded, but they are susceptible to brokers taking the attitude that they can DIP all clients as a way of ‘tying them in’ when starting that relationship.
I prefer to explain to clients why I feel the need to undertake a DIP – or not – and feel all are receptive to my judgement. To date, it has rarely let me down.