Insights and News /

09 July 2019 4 min read

Opening the door to execution-only mortgages

Sneha Patel

Sneha Patel
Senior Consultant | Financial services | London

Emily Farrimond

Emily Farrimond
Director | Financial services | London

With mortgage providers taking a conservative approach to compliance post-Mortgage Market Review (MMR), the FCA have analysed the effect this has had on the market, and in its latest consultation paper, are making changes to address the limited opportunities for execution-only mortgage sales. There will be massive changes, perhaps even the size and scale of MMR itself, and mortgage lenders must act quickly to build their execution mortgage sales capability for the future. 

Why is this important now - when there were execution-only mortgages in the past? Does it ever feel as though Open Banking, and API’s are the answers to every question ever asked, well in this case, they really might be.

The FCA has published CP19/17 to address three ‘harms’ in the mortgage market, the first two aligning very clearly with Open Banking:

  • Limited channel choice: barriers to the development of online tools to help customers, compare, select and apply for mortgages are called out as a specific area of opportunity 
  • Lack of digitised execution-only customer journeys: for many customers advice is the only option offered, or execution-only digitised channels are too complex to navigate
  • Overpaying on mortgages: a recent study found that 30% of consumers could have found an identical or cheaper mortgage than the one they were advised to select (Mortgages Market Study MS16/2.3, March 2019).

Tackling these ‘harms’ requires more than just providing consumers with a redesigned mortgage application process, it’s about fostering “an environment where innovation that meets consumers’ needs can flourish” (MS16/2.3, March 2019).

Leveraging customer data, available through open banking, will deliver truly transformational execution-only mortgage journeys. Customers will be able to allow mortgage companies to access their financial data through an online app for the purposes of a Decision in Principle and offer them a preferential mortgage rate within minutes, and we believe this is absolutely what the FCA are looking to achieve through the new regulation.  CP19/17 will drive digitisation and automation at a massive scale, transforming the UK mortgage market. We believe that we will see:

  1. Complete digitisation of the customer journey - enabling self-service
    • Significant investment in leveraging open APIs, and building analytics capabilities to assess the data available.
    • Major investment in transforming digital channels enabling ‘self-service’ and subsequent enhancements to technology/ support models to assist customers.
    • New digital tools to provide a seamless execution-only experience.
  2. New entrants into the mortgage market
    • As firms look to capitalise on this regulation, coupled with Open Banking and Open Data, increased competition should be expected.
  3. Fundamental changes to the end-to-end mortgage sales process
    • Streamlined end-to-end process that puts the customer in control of their data and allows them to interact seamlessly throughout the process.

With the regulation expected to be finalised in Q3, now is the time to start building the new capabilities required to succeed in the execution-only market, gaining first mover advantage.