Against this backdrop of adapting to regulatory change IRESS has conducted its fourth annual Mortgage Efficiency Survey, which tracks the key trends in the industry over the past 12 months. In this blog I look at the main points to come out of the survey and cast some thoughts ahead to what this means for 2016 and beyond.
Henry Woodcock, Principal Mortgage Consultant at IRESS, discusses the main trends and findings from the IRESS Mortgage Efficiency Benchmark Survey 2015.
The standout finding from this year’s edition of the survey has been the way in which the MMR has impacted on the whole mortgage buying life cycle. The entire mortgage process from application through to offer and completion has been affected. A greater emphasis on advised sales and rigorous affordability assessment requirements have resulted in lenders facing challenges in sales interview times, lengthier processing and distribution channels.
The changes brought about by MMR have resulted in an industry wide review of distribution, subsequently leading to a significant rise in the number of mortgages introduced by intermediaries, up 22% from 2014 levels (56%) to 78%. The survey found that lenders expect this trend to continue, 69% predict broker numbers will further grow in the next 12 months. This growth has in part been driven by lenders such as HSBC and Tesco Bank starting to engage with and lend via intermediaries, having been direct only lenders for many years.
We may now be 18 months down the line from the introduction of the MMR, but it is still having a notable impact on the time taken to generate a mortgage offer. On average, 43% of offers are currently issued in less than 14 days, much lower than the 2013 average of 56%. However, this does represent a slight improvement of 1% from 2014 levels (42%). This can be attributed to the gradual move by lenders towards enhancing their platforms to straight-through processing and case automation. Despite this the industry still has a long way to go to reach optimum levels of automation, and consequently efficiency.
Technology allows processing to be to become automated, time and paper to be cut out of the process, and results in speedier, more efficient processing. If we look at the relative efficiency of different sized lenders, as shown by the survey, then it becomes apparent that the ability to invest in technology is now a key factor. The larger Tier 1 lenders with the greater spending power, who are more able to invest in process automation technologies have increased the number of cases going to offer within 14 days (by 6% to 59%). However, the smaller Tier 2 and Tier 3 lenders have seen a drop of 46% and 12% respectively, to 39% and 32%.
This year’s survey demonstrates that through all the regulatory changes the mortgage market is robust and innovative. The industry has been able to adapt its products and distribution accordingly, plus is embracing technology and the benefits it offers. This will only continue as we head into a year that offers yet more regulatory change in the shape of the EU Mortgage Credit Directive. Digitalisation will become ever more paramount, lenders and brokers alike will need to head in this direction to keep up with consumer demands and to enable them to adapt to the new regulations in as seamless a manner as possible.
The 2016 survey promises to provide yet another fascinating overview of these changes in the industry.
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