Every year Iress carries out forensic research with lenders of all shapes and sizes to identify key trends and understand the major themes affecting the UK mortgage market.
Last year we focused on understanding lenders’ attitudes to environmental, social and governance (ESG) priorities and found that lenders’ thinking and actions were influenced particularly the ‘S’ and the ‘G’ elements.
A clear focus on dealing with distressed borrowers and potentially rising arrears cases was evident – that social responsibility to manage customers appropriately, fairly and to ensure good outcomes was paramount.
Governance aspects like the Consumer Duty and Mortgage Charter shaped lenders’ conduct and expectations – we expect they will continue to be a dominant theme this year.
In our 2024 Mortgage Efficiency Survey, we plan to focus on lenders’ use of technology, attitudes to interoperability, cyber security and to what extent they are embracing artificial intelligence and machine learning.
Every year new technology emerges, designed mainly to improve the process efficiency for mortgage lenders and advisers.
The past few years have shown us just how vital clever and flexible technology is for lenders.
The speed with which lenders can adapt and react to sudden events was exposed as a significant competitive advantage or disadvantage following the 2022 mini-Budget and consequent panic in the markets.
The balance of market share is hotly contested on a daily basis – lender appetite for lending shifts quickly and can have a dramatic impact on their service levels if they are unable to move fast enough.
Speed and ease of service is another area we expect lenders to be focused on, particularly in the context of changing regulation and the consumer duty rules being extended this summer to include existing products.
Customer outcomes are paramount under the duty and all firms rely increasingly on technology’s ability to identify, document and track those outcomes consistently.
Arrears management and delivering on the Government’s Mortgage Charter were top priority for lenders last year – we expect that to continue.
There are still over 1.5 million borrowers facing refinance from fixed rates around 2.5% to deals priced over 5% in some cases.
There is a fine balance between good customer outcomes for the foreseeable future and the longer-term impact on borrower finances. How technology can help protect both customers and lenders’ interests is likely to be front of mind for lenders of all sizes.
The complexity of modern business and the evolution of SaaS solutions means that increasingly ‘best of breed’ options are available to organisations of any size and offer more agility than a one size fits all approach to platform development. But with this opportunity comes a greater reliance on interoperability.
Lenders and brokers are using multiple interfacing systems throughout the mortgage journey. We will be seeking to understand how much better these types of solutions are and where more work is needed.
With increasing investment and reliance on technology, cyber security has become a complex area – attacks can come from a multitude of angles, particularly where organised crime is the motivator.
Authorised push-payment fraud, phishing, scams, hacking databases and the use of malware and ransomware has exploded in recent years.
Verizon’s 2022 Data Breach Investigations Report shows where the emerging risks lie. In financial services specifically, 50% of data breaches in 2016 involved servers. In 2022 that had risen to 90%.
Data protection, privacy and control of customers’ security in an increasingly digitised market gets more vital every day, and a more co-ordinated approach across the industry’s various subsectors is needed.
In November last year, a cyber security breach at a conveyancing tech provider, left between 80 and 200 law firms unable to progress thousands of transactions.
The fallout on the entire mortgage market was palpable and exposed just how devastating an attack can be.
True AI isn’t really there yet when it comes to practical application in the UK mortgage market, but the use of machine learning is becoming more sophisticated.
Processes such as underwriting, affordability risk assessment, administration processing and documentation can be vastly improved by algorithmic learning to predict and streamline.
Using big data collected across back books and centrally to inform criteria strategy and automating that improves not just speed and efficiency, it also has the potential to improve credit risk management.
Understanding how machine learning can support more responsible lending resulting in good consumer outcomes is also high on lenders’ agenda this year.
It’s tempting to fall back on thinking the big themes for mortgage lenders this year concern tax, interest rates and the outcome of a looming general election.
These are all concerns and major challenges to be managed, but they describe a context lenders must work within today.
We know that responsible practice and commercial success depends on long-term thinking and strategy.
Agile systems are a must to allow lenders to navigate tactical decisions and manoeuvres, but these must be underpinned by future-proofing business models.
Steve Carruthers is business development director at Iress
