The emergence of new digital tools and services is becoming an increasing driver of intermediary mortgage business, according to Intermediary Mortgage Lenders Association (IMLA).
Its report ‘The technological new frontier: digitalisation in the mortgage market’ suggests that as the Financial Conduct Authority (FCA) and mortgage lenders themselves support the digitisation of the market, UK consumers will find it quicker, cheaper and smoother to access mortgage finance.
Growing web traffic helps mortgage brokers
According to an examination of Google Trends, more people are looking for a broker online while fewer consumers are searching directly for the best mortgage deal.
In 2018, searches for ‘mortgage broker’ – which highlights local mortgage brokers with a web presence at the top of any Google search – reached 14-year highs, increasing by 180% in five years (from a search volume score of 22 in December 2013 to 62 in December 2018).
The increase in customers seeking information on mortgage brokers online aligns with the growth of intermediary mortgage completions. Over 70% of customers now source their loan through an intermediary when changing lenders.
What’s more, the findings suggest customers want a professional who can explain things, meaning three in five customers today would prefer to speak with an adviser about complex products, such as mortgages.
Comparison websites make limited inroads to mortgages
IMLA’s report indicates comparison websites have made limited inroads in the mortgage market, in contrast to other financial products such as car and home insurance.
It noted that the comparison websites only provide customers with a list of mortgage products from different lenders based on a limited range of criteria such as loan-to-value (LTV) and borrower type. There is no certainty that customers will qualify for the loans they select.
According to Amazon Alexa, more than half of all traffic to the top five UK price comparison websites is via organic web searches. The lack of inroads in the mortgage sector can be underlined by the lack of mortgage-related terms which are driving that traffic.
By examining the top 100 organic keyword search terms which lead to referrals for each of the websites, terms referring to both ‘cars’ and ‘insurance’ are bigger drivers than ‘mortgage’ terms, which only account for 10% of all organic traffic into the websites.
Robo-mortgage broker revolution still a long way off
Interestingly, 38% of brokers see the rise of ‘robo-advice’ as the biggest threat to their business in the next three years. However, there are a number of obstacles that stand in the way of firms seeking to implement a full robo-advice model, IMLA says.
For example, replicating the ‘softer’ skills of a human broker – where the broker can appraise how well the customer understands the options on offer – will be challenging.
IMLA’s 2018 survey showed that 80% of members expect less than 5% of their mortgage business will be served by web-based robo-advisers by 2020.
The report also notes that people’s lives frequently don’t fit into neat algorithms. Typically, brokers successfully challenge cases that are initially turned down by the lender for falling outside its criteria, and will know which lenders usually offer attractive product transfers at the end of an initial deal.
“We have already seen a number of digital advancements as the industry seeks out solutions to improve the mortgage and property transaction process. But we’re still some way from seeing a completely automated mortgage market as the technology cannot yet – and may never – fully address all customer needs,” said Kate Davies, executive director at IMLA.
With consumers appreciating the skills by brokers, and online tools making it easier for mortgage brokers to advertise their services, the digital revolution has yet to disrupt the traditional mortgage journey, and has instead made it more effective.
“That’s not to say that changing isn’t coming,” Davies continued. “Advancements in Artificial Intelligence and big data capture and manipulation are allowing more of the mortgage transaction process to be digitised.”
“I’m sure we’ll see new and exciting developments in technology and delivery – and our members are very aware of the need to keep up to speed with what the market can provide and what consumers increasingly expect, so that they can stay ahead of the curve.”