Technology is so pervasive that it is easy to forget just how fundamentally it has impacted our lives. In fact, it is hard to think of an area of life that hasn’t been made more accessible, faster or cheaper.
Personal finance is no exception. Price comparison websites, mobile banking, and other innovations have all transformed the way we think about financial services.
Processes that previously required reams of paperwork, hours of time, and often exorbitant fees are now purely online and can be completed in minutes.
But there is one part of our lives which remains far too cumbersome, and strangely resistant to technological change: the mortgage market. This is particularly strange given that millions of people in the UK have one.
In many ways, the mortgage market is working very well for consumers. Driven by the historically low base rate, rates have almost never been cheaper.
But while mortgage pricing is attractive, in relative terms, the mortgage process itself is still hugely inefficient.
The approval process for a mainstream homeowner mortgage, from application to completion, can take many months and comprises a large number of steps. It is still largely a manual process and requires autobiographical levels of detail from the customer.
Amazingly, this has changed little from how things worked at the time of the advent of building societies (the original purveyors of mortgages) in the nineteenth century. Things can take a lot longer if you don’t fit the criteria of a "standard" borrower, such as being self-employed.
Disruption is usually driven – or at least accelerated – by the customer. A good experience becomes an expectation, which becomes a demand. But everyone knows that the mortgage process is frustrating.
Whether you are a business customer buying at auction or a homebuyer in a chain, time can be a crucial factor when buying a property.
Why, then, has it been so slow to be disrupted?
Perhaps the most obvious reason is the complicated nature of the underwriting process. Data – on the borrower, the property and so on – is crucial to analysing and accurately pricing risk, but lenders have to use multiple sources to find and analyse the information.
It also means that, quite often, different teams within a lender are working with different tools, in different places, without talking to one another.
This all takes time, increases costs and hinders flexibility, resulting in a one-size-fits-all pricing model that doesn’t reflect the fact that every borrower is different.
In other industries, it would be unthinkable.
But improving this process is difficult, particularly for the big banks. These monolithic organisations still rely on technology infrastructure that was installed long ago and is not easy to change without major disruption.
The words "technology upgrade" bring most bank customers out in a rash.
Things are changing. Open banking presents a real opportunity to streamline the data-gathering process, although it is still often an arduous experience.
Meanwhile, cloud-based software, advanced data analytics, artificial intelligence, and machine learning can transform the underwriting process, leading to more efficient, accurately priced and flexible borrowing.
What’s more, freed of legacy IT systems, tech-savvy lenders have the agility to continually improve how they do things – without causing a meltdown.
The latest technology will overhaul the mainstream mortgage market, where customers have had to put up with sluggish and onerous processes for far too long.
The age of the near-instant mortgage is coming.