Open finance – rethinking mortgages

Nowadays, getting a mortgage on a property is a cumbersome process. Worst of all, consumers don’t even want to buy a mortgage—they want to buy a home. Unfortunately, the mortgage is a necessary evil.

Consumers today highlighted three key challenges in the mortgage process:

  • 49% find the application and approval process too lengthy
  • 34% find the application and approval process unclear
  • 30% find it difficult to compare providers

How can open finance improve the mortgage process?

Create simple, consistent product comparisons

Mortgage brokers play an important role in comparing, evaluating and applying for mortgage products, but they still wield a disproportionate amount of knowledge and influence.

Digital alternatives are revolutionizing the market and helping customers to find the right product for themselves.

In just 15 minutes, Habito can give a consumer an overview of suitable mortgage products across the market based on their exact needs.

However, this and other similar solutions still rely on the user to enter important income and expense information. Integrating with Open Banking data alone would increase the accuracy of the recommendations these brokers could make; If the market fully embraces open finance, they would have an even richer picture.

Increasing the transparency of the mortgage approval process

Over a third of consumers believe the biggest challenge when getting a mortgage is the unclear approval process.

This speaks both to a gap in financial literacy and to processes that are opaque, convoluted and highly manual.

The former is already being addressed. Mojo Mortgages offers a Mortgage Score product that enables consumers to become “mortgage ready”. This combination of analysis and advice gives the consumer meaningful information while giving them a better understanding of the entire mortgage process.

As this evolves into the Mortgage Coach, clients will receive critical real-time advice to help them prepare for a mortgage.

To address the latter, the industry could work towards a standardized workflow framework that the customer can see and be notified of within their preferred digital platform.

Mojo Mortgages has worked with lenders across the market to add status updates to their API messages. This gives customers an overview of where their application is located at 18 stages of the process – an important step towards greater transparency.

Shortening the lead time to secure a mortgage

A mortgage is not a trivial financial product. A consumer enters into a debt contract worth tens if not hundreds of thousands of pounds for the next 25 years or more.

It therefore makes sense for a lender to take the time to determine if this is someone they should be lending to and for the person to have time to fully appreciate the nature of the product.

However, open finance can streamline this process, improving both the customer experience and reducing organizational costs – while ensuring that the needs of both parties are met.

The instant delivery of categorized, analyzed banking data across a consumer’s entire financial landscape can enable mortgage providers to make instant lending decisions with greater accuracy than before. Rather than requiring a customer to spend months digging up and providing bank statements, they could allow their mortgage provider to see their entire, current financial situation through a simple mobile consent journey.

Account Score has partnered with Click2Check to provide mortgage brokers with insightful, pre-qualified customer information based on bank transaction data.

To take it a step further, solutions like these need to be embedded in the end-to-end mortgage application process. Once the customer provides personal and bank transaction data – ideally with a single click and biometric verification – it is seamlessly carried through from affordability assessment to product comparison and quotation.

With the greater availability of data, more thorough, more insightful analysis, standardized workflows and product information, and a trusted approach to identities, the market could be completely disrupted.

“This really sophisticated process from transactions to a mortgage offer is possible and all the technology is in place today to make it possible. We just have to let this ecosystem mature a little.”


And what about the rental market?

Fronted, which launched its product in early 2021 after a pandemic-related hiatus, is using Open Banking data to conduct an affordability assessment so they can offer tenants a much-needed and affordable loan to cover the cost of a security deposit. This is a welcome solution as tenants are the most likely to be affected by the pandemic and can often only be data from credit bureaus.

The beauty of open finance is that over time it should enable solutions that connect the dots to seamlessly support people on the journey from renting to homeownership. It’s an often frustrating, convoluted, and fragmented process that’s ripe for disruption.

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