Michael BoltonMarketing manager, Future Mortgages
What does the future hold for online mortgages – are they the shape of things to come or just a load of boo.com?
Electronic or on-line mortgage services, according to some industry commentators, have become the Holy Grail that many lenders seek. In this bright new era of web and direct-based operations, the attractions to big businesses are obvious.
First and foremost, there are no costly branch networks, no expensively trained (and compliant-safe) salesforce to worry about. Second, despite boo.com's recent failure, the significant impact an internet strategy can make to a company's bottom line, namely the share price.
So why is it that the lending industry has been distinctly ponderous in getting its act together? Most lenders have only just managed to get their product literature online with, if you are very lucky, a quote facility so at least the lender can claim it has launched a website.
At the same time, weare all aware of the painfully long discussions that went nowhere, sponsored by the industry's trade body, the Council of Mortgage Lenders to try to establish a common trading platform.
The net result? Information-only websites which lag distinctly behind the pace of web development in other industries and a rapidly fragmenting market in danger of providing massive information overload. Both the lack of a common trading platform and any clear market leader in online mortgages, together with the proliferation of on-line “middlemen” mortgage services will only contribute to making things worse before they can get better.
The secret in the short term is to stick to those lenders which you are familiar with and if they do not offer an online facility then look for an alternative lender for that product area. Online use will be driven by mortgage intermediaries who grasp the competitive advantage that the turn-round speed will give them.
Thanks to a lack of foresight, and driven by a very narrow self-interest, mortgage lenders will face an increasingly fragmented market. Some lenders will take the decision not to offer an on-line service and, as with the off-line packager market, rely on the online equivalent of a pack-ager, that is, the middlemanto distribute on their behalf.
If the lender does decide to brave it and launch an online service, most have a lot more work to do.
Today, lenders mostly offer an information-only website but be under no illusions – the technology and investment required to go truly interactive is daunting.
So what can you, the mortgage intermediary, expect from the real thing – a complete interactive online mortgage facility?
Imagine your client in the office. Instead of filling outa paper application form you can key the information directly on to the application form accessed through the lender's website.
Obviously, various security measures will be put in place before you can start using the facility to ensure confidentiality. In addition, the application forms are “intelligent” – unnecessary questions do not appear. For example, if your client is self-employed, the application does not ask questions relating to employed status. The form also “self- populates,” which means that once information is keyed into one area, it will be automatically appear in other areas such as address or bank details.
Once submitted, you will be able to track the progress of the mortgage application. For example, when was the surveyor instructed? When were the solicitors instructed? Are there any references outstanding?
Even on the most straightforward and well completed application form queries crop up and most of these often only require a one-word answer. Lenders have been reluctant to expose their underwriters directly over the telephone to mortgage intermediaries for fear of undue influence being exerted. Email speeds the query process and takes the emotion out of the discussion.
If your client requires agreement in principle and quotations then these will be available. You will also have access your own fee account to keep track of procuration fees due from the lender.
All promotional, marketing and, if preferred, the mortgage application form canbe downloaded to print ina paper version.
A word of warning. The caveat to the electronic route at the moment is that a hard copy of the application form and mortgage offer still has to be printed and sent out for the client's signature. Electronic signatures are still not legalbut will be shortly.
So if this is what a potential online mortgage service looks like, what are the tangible benefits to you and your client?
To start with, more information is to hand and the processing time is speeded up along with faster decision-making. Since the mortgage application form cannot be sent without the full information and because it is printed and not written, the lender will have all the information required in a readable format to make a swift decision. This all means added value to you and your client.
Another benefit is that technology will drive down costs and, assuming some of this is passed on, it should result in cheaper mortgages for your clients.
In an ideal world, it would be the market leaders in the mainstream mortgage market that would be spearheading the bright new dawn.
However, as with product development and innovation they are sadly lacking in the online stakes. It falls to the niche, non-mainstream lenders to open up the technology frontier in the online intermediary market.
The big institutions are quick to promote their online facilities in the consumermarket as an alternative direct distribution channel but are slow to devote resources in the intermediary market.
Nobody is over-exaggerating the short-term business potential of distributing mortgages online. It will depend on the general growth within the country of buying goods and services online and this will rest on consumer confidence in the security safeguards of paying online.
Given the tremendous interest in anything internet-based it is easy to imagine in the longer term that the e-revolution is here to stay. When you apply that technology to a paper-intensive product like a mortgage then it is not difficult to see the benefits to the intermediary. Welcome to the 21st Century.
Michael BoltonMarketing manager, Future Mortgages