How the Tech Revolution Transformed the Mortgage Market
Everything tech touches, it makes smarter. From the latest developments in the telecommunications to goal-line technology in football, the world around us has been improved by the latest tech innovations.
With that being the case, it’s little surprise the financial world is embracing new, tech-forward ideas. Indeed, when money is on the line, banks and building societies want to ensure they aren’t putting themselves or you at risk. Therefore, if technology can step into the breach and help, those in charge will grab it with both hands.
One area where technology is starting to make a real impact is loans and, in particular, mortgages. Although the majority of borrowers are responsible, there are times when people fall into arrears. In fact, at one point in 2018, the number of outstanding mortgage balances with arrears was up for the first time since 2016. Increasing by £200,000 between Q2 and Q3, the data shows that lenders and borrowers are still missing the mark when it comes to suitability.
Technology Helping Everyone Get a Better Deal
Naturally, however, it is both sides that are looking to get a better deal. Lenders want to ensure they’re lending to the right people and borrowers want to ensure they’re getting the best product. For the latter, there are plenty of resources online, created and provided with the help of the latest technology. Internet brokers now provide a complete overview of the latest offers and the institutions that provide them. For example, if you read through Trussle’s review of the NatWest mortgage application process, you’ll find a wealth of information about the bank. From the application process taking ten days to the lending maximum being 4.85x your annual income, all the important stats are there. From these reviews, prospective borrowers can use the site’s mortgage calculator to compare and contrast the knowledge they’ve gleaned. The end result, in theory, is that they get the best deal possible.
As we know, knowledge is power, and that’s why lenders and brokers provide as much of it as possible. In their mind, if borrowers are better informed, they’re more likely to choose the right product and, in turn, not fall into arrears.
AI Reducing Risk for Mortgage Lenders
On the other side of the coin, lenders are now embracing artificial intelligence (AI). Using the latest AI protocols, they are able to make better decisions. As well as new ways of processing data and assessing applicants, AI is also helping to tackle fraud. Start-up ID Finance has integrated behavioural biometrics into its AI fraud scoring software. Boasting a 97.6% success rate, the software can detect fraud by recognising typing and behavioural patterns. In fact, AI can even analyse variables such as mouse movements to determine whether a real person is making the application.
This use of technology is not only impressive but highly valuable for banks. In reality, mortgage applications are a risk scoring process. The ones that get approved have basically achieved a suitable score based on a predetermined set of factors. By using technology to tighten up the process and make the criteria more stringent, banks are mitigating their risk.
While there will always be borrowers that fall into arrears, technology is helping to prevent it from happening. If that happens, it will improve the mortgage economy and make lenders more willing to lend. Thus, as mortgage technology improves, so too should our ability to borrow money to buy a home.