Seven-day mortgage switching is still an admirable aim
Joe Pepper is managing director of EDM Mortgage Support Services
It is now possible to immediately switch a range of services and providers from your smart phone, such as bank accounts, utility providers and insurers.
The more tech-savvy we become, the more we regard such functionality as the norm.
Unfortunately, the UK mortgage industry has so far struggled to offer such functionality.
Recent developments around an online application process from new challengers such as Atom Bank, and now established banks like NatWest, are a step in the right direction, but the subsequent process to completion is still far too long.
The younger generation particularly must find it frustrating that a mortgage lender cannot offer such a service.
The UK took a step towards addressing this issue in May last year when the UK government requested industry comments and views on its proposal to introduce seven-day mortgage switching.
In our own submission, EDM MSS welcomed the move as being entirely feasible but warned that the challenge for the mortgage industry is that a seven-day switch time needs to include risk decisions being made by third-parties, including valuation professionals and conveyancers.
Each lender will need to satisfy both themselves and the regulators that they have adequately assessed the risk associated with lending to a specific consumer and the value and title of the property asset upon which they have made the loan.
Given the wider political events of the last 12 months, the focus on seven-day mortgage switching has diminished somewhat in the government’s eyes.
EDM MSS believes it is still an important issue though and we commissioned research among consumers to gauge their thoughts regarding the prospect of seven-day mortgage switching.
The research found strong demand for faster mortgage switching and a need to simplify and improve the switching process.
Key findings include:
• Four fifths of respondents (80%) said it was a good idea to offer mortgage owners the option to switch mortgage providers within seven days, with more than half (51%) stating said it was “absolutely” a good idea to do so
• One in six (17%) people said in their view it should take up to four days to switch; more than a quarter (29%) said it should be between five and seven days; and a third (33%) said 14 days
• Of those that had not switched mortgage provider, two fifths (40%) said this was because of concerns over the complexity of the switching process
• Of those that had switched mortgage provider recently, 27% said the process was difficult (22% said “quite difficult”)
• Of those that had switched mortgage provider recently almost a third (31%) in total said the process was so difficult or expensive that they are put off from switching again.
The research points to significant demand for better switching processes and outcomes by UK consumers – a sentiment that will only increase as technology and new service offerings are seen and felt in the mortgage market and wider financial services sector.
Our research found that 18-24 year olds were the keenest for mortgage switching to take up to 14 days: 42% of this segment (the mortgage buyers of tomorrow) compared to 33% overall and 35% for 45-54 year olds.
The benefits to a customer of a seven-day switch are clear: a quick and painless way to transfer from one lender to another will prompt consumer action, increase competition between lenders, quicken the pace of change in the market and provide maximum choice and value to customers.
The technology already exists to allow consumers to switch mortgage provider within seven days.
There will always be some instances when it will take longer than seven days to run the necessary checks etc. to complete a switch but the technical capability is already available in the UK.
EDM MSS’s Property Risk product PRISM, as well as its Valuation Exchange (VEX) suite already provide the infrastructure to do so, for instance.
We are also actively trialling new products aimed at digitising further aspects of the mortgage process – such as using artificial intelligence to read identification documents, like passports, and input the necessary information into suitable formats in a matter of seconds – to further speed up the process.
PRISM technology enables lenders to assess property risk in seconds through a combination of the lender’s own data sources and business rules, creating a digital hub through which valuers and conveyancers can share and complete formal assessments.
In bringing all the necessary professionals into the same online space where information can be shared and work completed the time taken to efficiently complete tasks can be rapidly reduced.
There is no reason why the process, including the conveyancing and valuation, cannot be done in seven days in most cases.
The technology already exists to make it happen but at present, lenders’ systems do not facilitate it – and that needs to change.
The extended times taken to remortgage currently being seen in the market are a result of the antiquated technology and processes used by the industry.
Even with much of the underlying information required to complete a switch already in data format and available at the touch of a button, the process is sadly hampered by competing systems, an over-reliance on paper documentation and resistance to the adoption of new technologies.