Mortgage lenders are using tech to react to changing interest rates and a moving market

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Modern platforms are giving providers the opportunity to introduce innovative products quickly, as well as flexibility to work with a wide range of partners.

“A platform like Mambu has more than 30,000 product configurations, which means you can build pretty much what you want and you’re not restricted to what’s been hard-coded into a monolithic system on a legacy platform,” explained Nick Lawler, market director for Europe, the Middle East, and Africa (EMEA) at Mambu, a software-as-a-service (Saas) cloud banking platform.

“Technology is allowing providers to work with a range of partners, from the origination layer to the servicing layer to the digital banking proposition to the regulatory reporting.

“If you look at the front-end, for example, it could be utilising origination using open banking, it could be using Companies House data – can the core allow for that? Is it open and fully application programming interface (API) accessible?

“At the back-end, when it comes to downstream applications such as payment dispersals, some of the older systems use a messaging service – which is basically file scrapping – which builds a file that’s picked up every hour, whereas a platform like Mambu has a straight API link that will allow payments in and out quickly.”

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As well as giving borrowers greater choice, technology is also simplifying and demystifying the application process.

“One example of trying to solve the problem around identity verification would be to use a digital wallet, which all parties within the supply chain could reference, rather than the customer having to dip in and back out to validate,” suggested Stephen Brown, head of intermediaries at Scottish Building Society (SBS).

“As an industry, we’re working towards improving, but it’s very, very slow.

“Each business has very different governance frameworks and will view risk in different ways.

“That’s one of the things that’s slowed innovation over the years – each lender has taken its own approach, rather than there being a unified approach across the industry.”

Fintech expertise is a way forward

Mr Brown highlighted the work being done with building societies by Edinburgh-based Etive Technologies to develop a single standard for identity verification.

“They’re taking it to a policy level first – they’ve worked with solicitors and builders so far and have now moved onto building societies,” he explained.

“They’re not a software vendor. Instead, they create the standard that the industry would work towards.

“There are also exciting developments with regards to verifying income, with two of the credit reference agencies now offering products that allow mortgage companies to go directly to payroll providers for wage slips, with the applicant’s permission.”

He also praised the work being done by Maria Harris, chair of the Open Property Data Association (OPDA), which was set up by the Home Buying & Selling Group to use data to digitise the homebuying process.

As well as running workshops and events to facilitate collaboration and innovation, the OPDA also operates a developers’ hub, including details of the designs for APIs.

From the borrower’s perspective, Dean Butler – managing director of retail direct at Standard Life, who recently remortgaged – believes that financial technology (fintech) has a role to play in simplifying the mortgage process.

“A lender or an independent platform could look at the customer buying experience and digitise it to create a seamless guidance journey,” he said.

“If you could connect it through open banking then you can get a quick assessment of someone’s income and their expenditure to work out how much money they have available at the end of each month to put them in a comfortable position to take a new mortgage.

“That could then determine which mortgages you’re shown as options, depending on whether you want the stability of a five-year mortgage or you want a shorter mortgage because the market might change in your favour.

“You could create that end-to-end digital experience and then the customer can reach out to someone at the end if they need that little bit of hand holding or reassurance.”

Mr Brown at SBS agreed that open banking held potential but noted that the take-up among consumers had been slow so far.

“We’re now starting to see some of the bigger lenders embed the technology into their businesses,” he added.

Looking further ahead, industry experts highlighted the importance of regulation keeping up with developments in areas such as artificial intelligence (AI).

John Baguley, mortgage policy principal at UK Finance, the trade body that represents banks and other financial services operators, said: “Many lenders already use cloud computing to help them run their businesses more efficiently.

“As technology evolves and AI becomes more widely used in the mortgage application and underwriting process, it’s important that firms understand any potential risks this could bring.

“In addition, the regulatory framework must also evolve to reflect these changes so that lenders remain compliant while providing customers with better and faster outcomes.”

Initially, AI is likely to become a tool for mortgage underwriters to carry out assessments.

“Within the next ten years, I predict that we’ll start to see AI being used in underwriting, probably for simpler remortgage transactions at low loan-to-value ratios to begin with,” SBS’s Mr Brown added.

Download Mambu’s recently published report ‘Revolutionise mortgage lending with cloud-based tools: a guide to efficient loan management’ and discover how moving core lending technology into the cloud can open the doors to a resource-lite way to develop, launch and run exciting new mortgage solutions.

Read more about what is being done to Transform the UK Mortgage Market in our dedicated Mortgages Hub HERE