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How innovation is transforming the mortgage market

As with so many parts of our lives, the mortgage industry is being revolutionised by digital technologies that are turning the old, slow, high-street bank focused model on its head.

A key reason for this change is demographic - consumers buying houses today have grown up with technology at the centre of their lives. As a result, they expect technology to sit at the centre of the mortgage process too. This expectation is creating exciting opportunities - and challenges - for innovators and incumbents in the mortgage market today.

A consumer-driven revolution

It was only a matter of time before the mortgage industry was challenged by digital technologies. It’s fair to say that the mortgage market hasn’t changed much in decades. This stagnancy led to the FCA calling for more innovation across the industry last year. New technology was needed to breathe new life into the industry, making it easier for consumers to identify mortgage products they qualify for, assess and compare these products and, ultimately, take out a mortgage.

The need for digital innovation is being demanded by a generation of millennial consumers who are now old enough to buy houses. Millennials have grown up with technology. From banking to dating to shopping, they trust apps and platforms to perform risky, complex functions. Mortgages fit into this category. Thus, the mortgage market is having to innovate to meet their demands.


Developing technology progressive regulation

It’s taken time, but the internet has allowed traditional financial services providers to scale their offering to more customers, for example, via mobile apps.

The most significant operational shift in financial services has been the rise of robo-advisors. They have changed the way people save, invest and borrow, as technology has driven consumers towards low-cost, friction-free solutions. Robo-mortgage advisors, such as Moneyfarm and Proportunity, are fast appearing and beginning to win market share. 

These startups are being aided by regulatory changes that seek to further help the consumer. The introduction of Open Banking last year changed everything for financial services consumers, allowing them to give companies access to their financial data so they can recommend products and services to help you move, manage and access your money.

This move is stimulating innovation and competition in the mortgage market. The data that consumers can share can now be accessed by third-party providers who quickly and seamlessly can analyse it and decide whether there is a suitable mortgage product available for that person at this time. In theory, this will make securing a mortgage quicker, safer and more efficient.


A word of caution

As we know, arranging a mortgage is one of the most important decisions that we make in our lifetime, so it’s understandable that people can be a little hesitant to complete a transaction of this size entirely online.

However, as we’re seeing with other industries that are being reshaped by technology, this hesitancy is changing. People’s concerns are slowly but surely being overcome. Take banking, for example. A few years ago, people were reticent to use mobile technology for their everyday banking needs. Nowadays, mobile banking is common and widespread, as consumers have built deep-rooted trust with and faith in technological applications. We’d expect the mortgage industry to develop in the same way over time.

It’s also worth bearing in mind that regulation is making great strides towards building a regulatory landscape that is providing the necessary security for fully automated digital mortgage solutions. Of course, there is still a little way to go, but a truly automated and innovative mortgage solution is not far from coming to fruition.

* * * * *

Technology and innovation are improving the mortgage market before our eyes. With great speed, every aspect of the industry is being changed for the better. 

At Shieldpay, we recently partnered with PPL to offer the UK’s first fully digital mortgage settlement and well as being a part of the first blockchain real estate transaction. We believe that the future of the mortgage market is digital and our digital escrow facility means buyers and sellers have visibility over the status of funds at any point, plus house buyers can transfer funds to sellers while paying fees to estate agents and solicitors in real time. It’s a fast and efficient way to achieve completion and it reduces the risk of fraud by verifying the identity of the parties involved.

We believe that technology can help traditional industries evolve and meet the demands of an ever-more demanding breed of consumer who want convenient, streamlined solutions at a reasonable price. Technology allows us to meet those demands, providing an efficient solution that passes savings along the chain, back to the end consumer. 

The rise of innovative technology means that, at last, the mortgage market isn’t far off being able to deliver something of real value to those consumers, and we’re proud to be at the heart of that solution.


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