This article first appeared in the IRESS magazine Industry Voice.
By Julie Griggs, Director, CPC Finance
In the 21st Century technology is changing all aspects of consumers’ lives. In the UK, the financial services industry is one that is being transformed at a rapid pace. As consumers embrace technology, they become used to the speed at which tasks can be accomplished and in turn expect even faster results. Companies that can provide speed and convenience are the ones winning market share and those that are not, are being left behind.
There are new technology companies emerging to respond to this demand in the mortgage industry. Some of these companies aim to replace high street brokers with online chatbots, which help home buyers find a loan through asking a series of questions and then scanning the market. The software is trained through exposing it to thousands of interviews from personal mortgage brokers, before being checked by an expert.
While the highly regulated owner-occupier residential mortgage market can be more easily automated, the buy-to-let market is different and more complex and needs more flexibility and subjective interpretation. In the buy-to-let mortgage industry, brokers control the majority of the market and so consumers are looking to them to provide speed and convenience in finding them finance.
Although vanilla buy-to-let products are relatively straightforward, most buy-to-let products need a specialist approach from both lenders and brokers. Moreover, with the new regulations coming in on an ongoing basis, the landscape will only become more complex.
The incoming PRA regulations affecting portfolio landlords are a case in point. The additional information that lenders will need places an extra administrative burden on brokers, which will slow down the process, initially at least. Here, technology and automating the information gathering process will help speed up the process. Broker portals and smart affordability calculators are just some of the tools being developed to help brokers offer the most suitable products available to their clients.
However, this does not mean that brokers will be less important. In fact, this new regulation will make their role even more critical. Technology can help gather information but human expertise is still essential to its interpretation. In the case of the new portfolio landlord regulation, each lender is interpreting the new regulations slightly differently and brokers are crucial to making sure that each lender has the information they need to sanction the financing.
Lenders recognise this and are developing their technology accordingly. These new technologies are intended to allow brokers to respond quickly to loan application questions, streamline portfolio stress testing and income coverage ratio through one dashboard.
This is a perfect example of the speed and convenience enabled by technology, combined with the expertise and flexibility of the human touch. Brokers’ work will be enhanced by technology and they should embrace it rather than feel threatened by it.