Concerns around affordability have remained a key battleground for lenders, according to new data from Iress’ 2023 mortgage efficiency survey.
The survey was conducted between April and July this year and surveyed 36 lenders, representing approximately 55% of gross mortgage lending.
As well as asking them to evaluate their satisfaction with their own mortgage processing technology, the survey looked at broader trends that shaped the industry between April 2022 and April 2023.
According to the findings, the time taken for a broker to receive a Decision in Principle (DIP) from a lender’s decision engine decreased, with 43% of brokers able to obtain a DIP in under 10 mins compared to just 39% last year.
Overall, the average time for a decision was less than 20 minutes.
Referrals increased for the High Street lenders as the economic volatility of monthly interest rate increases impacted applications, which required more intervention.
In addition, confidence in launch and withdrawal processes improved, with most lenders able to launch a new product within 48 hours.
The results also showed a renewed focus on affordability, as rising inflation and subsequent increasing mortgage product rates continue to impact consumers.
Borrowing costs became crucial, leading to a surge in product transfers for borrowers seeking cheaper rates without additional affordability checks.
The increased concerns around affordability has sharpened lenders’ focus on dealing with distressed borrowers, as well as governance aspects, like the Consumer Duty and Mortgage Charter.
However, lenders remain hesitant about using Open Banking as a solution to assess income and expenditure.
As one lender described, “it’s difficult to unsee information that muddies the underwriting water.”
Lenders are exploring alternative efficiency measures including API integration with payroll services, HMRC data, and Automated Income Verification tools to improve underwriting accuracy and reduce reliance on physical proof of income from clients.
Andrew Simon, Iress’s CEO for mortgages, said: “It’s clear that the effects of the pandemic are still being felt, both by borrowers and by lenders.
“Whilst the survey showed significant improvements in mortgage processing technology, perhaps the most significant trend was that of lenders positioning themselves to cope with future affordability issues and increased costs in borrowing.
“With more scrutiny being placed on lenders to ensure fair deals for borrowers, agile and dependable technology is key to meeting these future challenges.”
