Why automation is the next digital frontier for mortgage lenders in 2022

Kevin Gaut
March 18, 2022
February 18, 2022

The market has seen record levels of mortgage activity the past two years with an estimated 47% increase in house purchase transactions, the highest rate since the financial crash.

This increase in mortgage applications led to inevitable pressure on lenders and brokers to meet the demand of the market. However, with many lenders still relying on manual processes rather than making automation the foundation of their digital strategy, the market saw a two week increase in the average time taken between a new instruction to completion.

UK Finance estimates gross lending to reach £313 billion by 2023; This suggests the level of demand will continue, and while traditionally lenders have been slower to reap the benefits of new technology – is digital transformation and straight-through processing (STP) essential in 2022?  

Reducing admin

The first step for any lender is to think about their Target Operating Model (TOM), could your existing business processes support STP, if it was introduced? If not, then what would you need to change? At finova, we facilitate a digital transformation journey which delivers an automated mortgage process, creating greater operational efficiency while improving customer satisfaction.

Automation helps to reduce human errors often caused by re-keying data. By doing this, significant time is saved by reducing admin and eliminating time spent amending errors, all while increasing the reliability of the lender.

Open Banking plays a key role in STP and provides advantages such as giving lenders direct access to customer current account transaction data, therefore reducing reliance on paper statements.

When reviewing TOMs, lenders must shift their perspective from “this is what we currently do,” to “what changes need to be made to support what we want to do?”

For example, what changes could be made to risk and compliance teams’ processes to increase the business’ appetite for automated decision making? What similarities do most cases have and is there a way of categorising them? Design your TOM for STP and have manual processing as the exception not the rule and remember the time saved through automation also gives lenders added time back to focus on other priorities in the business.  

Customer retention

In 2022 due to a record number of maturities and hike in base rate, the market is expected to be dominated by remortgage activity.

As well as assisting with new business, STP also provides customer retention tools. Automated emails at key stages in a mortgage journey can offer information or guidance on next steps without any human intervention, as well as alerting borrowers of their options when they are coming to the end of a fixed term. This time-saving tool builds customer trust and loyalty, which helps boost retention rates down the line.

Integration into Open Banking services also would afford the lender an accurate up to date picture of the customers finances, enabling them to offer targeted retention campaigns and offers, reducing friction and further increasing customer advocacy.

These digital solutions can help lenders better adapt to the hybrid working environment. By integrating automation to a mortgage search journey, lenders can ensure that there is little disruption in servicing their clients, as they limit their dependency on manual processing.

The importance of now

To retain a competitive edge in the market, the value of adopting innovative tech, including STP specifically, cannot be overstated. Lenders should analyse their own operating models to uncover how they can best utilise STP to automate their processes and tackle high activity levels with ease.

Investing in technology enhances the efficiency of a business model and helps meet the evolving demands of customers. Consumers today crave the speed and ease of technology in almost every aspect of their life, and the mortgage journey is no exception.

My role as Chief Technology Officer affords me the opportunity to work with some of the leading entrepreneurs in our industry.