As an increasing number of borrowers continue to interact virtually for their lending needs in a post-pandemic landscape, there is a substantial shift towards providing home loan applicants with more online avenues. With major banks announcing the shutting down of over 300 bank branches, the preference of lenders and borrowers for digital avenues will undoubtedly have far-reaching implications for the mortgage broking industry as well. Here’s our take on how this development will affect the mortgage broking industry.
Digital Mortgage Services
In this model, borrowers submit their details online without human contact. All interactions are with a system. This kind of approach works very well for borrowers who like a DIY approach and applicants who enjoy submitting application-related information at their own pace.
A licenced mortgage expert will continue to play a vital role.
A licensed lending expert is critical in securing a home loan for the borrower in a digital mortgage setup despite feeding all details into a system. Applicant details are stitched together and shared with a licensed mortgage broker who assesses them and provides recommendations on home loan products that match the borrower’s circumstances.
In addition to an increase in digital mortgage broking services, there is also a spike in online lenders. Online lenders can offer great rates but have certain limitations.
- Their product array is far smaller than what a mortgage broker can offer.
- Online lenders are usually great for borrowers chasing the most competitive rate, have an unblemished record, and provide adequate income proof.
- If borrowers have poor credit credentials or don’t have adequate income proof, a straightforward home loan from an online lender may not work.
The rise of digital mortgage services is an opportunity for the mortgage industry as a whole for the following reasons:
- Catering to the DIY needs of certain types of borrowers will grow the mortgage broking customer base.
- A licensed broker is a crucial part of the home loan journey, for both a digital mortgage or a one-on-one interaction with the borrower.
- Online lenders cater to a particular set of borrowers and are unlikely to impact business from borrowers looking for expert advice to find a loan per their circumstances.
- Home loan applications are complex with extensive documentation. As the mortgage landscape evolves, borrowers will increasingly rely on mortgage brokers to scope the market, find them the right loan, and manage their paperwork.
A good mortgage franchise helps mortgage brokers identify such crucial industry developments and preps them for the following steps to make the most of such an opportunity.