Digital Mortgages – Thematic Research

Despite the ‘size of the prize’, the mortgage space has largely been untouched by both digitization and disruption. The basic product and its 20+ year term has remained unchanged for over 100 years. In other areas of customers’ lives, products and services have evolved to fit modern lifestyles. People stream music and entertainment content. They make payments, access advice, and apply for products, all from their mobile devices. Yet mortgages – the anchor of the customer relationship, and the primary driver of Net Interest Margin (NIM) – remains an antiquated experience organized around outdated bank processes and regulation, not customer needs. But that’s now changing.

Already in the US the largest originator of mortgages is a non-bank, Quicken Loans, which overtook Wells Fargo in the fourth quarter of 2017. Its digital upstart, Rocket Mortgage, has forever reset consumer expectations with a mobile-first application process, funding more than $5bn of mortgages in its first nine months. In Europe, digital mortgage brokers such as Trussle and Habito are intermediating more sales. Price comparison sites, credit bureaus, and niche fintechs are partnering. Property search sites such as Zillow and Redfin – which sit ahead of banks in the value chain – now offer loan fulfilment. The UK, Europe’s largest mortgage market, now has its first digital-first mortgage lender, Molo.

Scope

Gross advances in the UK mortgage market are expected to record a compound annual growth rate (CAGR) of 4.2%, reaching £338bn by the end of 2022 against a historic five-year CACR of 7.6% from 2013 to 2017.

In the UK, 70% of first-time buyers are millennials, most of whom are very comfortable using digital channels. Yet 37% of millennials still indicate they would opt to speak with a bank representative in-branch, testament to just how enduring banks’ reputation as a trusted advisor is after centuries of helping families through big financial decisions.

Digitization drives disaggregation of the mortgage market, with highly specialized new entrants, free from legacy issues, and often able to bypass bank regulation, biting off specific pieces of the purchase process. As these players combine to amass scale and/or plug gaps a variety of new customer journeys and business models become possible.

Reasons to Buy

Understand market size and growth forecasts for key mortgage markets

Identify technology, regulatory and consumer trends driving digitization in the mortgage market

Receive detailed insights regarding new entrants and their business models, and specially, how incumbent banks can protect themselves from disintermediation by those ahead of them in the value chain

Learn how incumbent banks can move beyond core products to build deeper engagement with customers (before and after the mortgage) and identify new revenue opportunities