Prospective mortgage customers are increasingly making multiple applications through brokers, branches and online channels in the hope of securing a home loan.
This is one of the latest findings from Digital Finance Analytics (DFA) data collected from 52,000 households. DFA principal Martin North told Mortgage Business that the data is showing that more multiple applications are being made to a portfolio of lenders in an attempt to get a single approved loan.
“These multiple applications are on the rise, and are facilitated by easier online processes and systems,” the principal said.
DFA estimates that approximately 18 per cent of prospective borrowers are making multiple applications, using more than one broker, their bank branch and online channels.
“We’ve got a very good handle on the channels consumers are using and their approach to the mortgage search. We look at it through the value chain of their initial search, where they get their information from and how many applications they make.
“Essentially, they are backing both horses. They are talking to brokers and potentially putting applications in via brokers but also putting applications in themselves.”
The data shows that in recent months, the number of mortgage applications which are made, but which do not lead to a funded loan, is on the rise. Back in 2015, the ratio was around 80 per cent. Now it has dropped to around 50 per cent.
Mr North believes that one potential driver of this scatter-gun behaviour among applicants is the simplicity of applying for a mortgage online.
“Particularly as platforms and websites allow customers to compare and choose products,” Mr North added.
“It is creating a lot of noise in the system. That means there is a much lower probability of an application a broker is handling translating into a funded loan.”
Consumers are far more empowered than they were in previous years when it comes to researching and applying for housing finance. Developments in digital technology, online broker models and comparison websites have aided and encouraged a DIY approach.
Mr North said: “In the journey towards pre-approval, there is so much noise in the system.
“Also, consumers have conversations with many different brokers to find out what they can do. They are almost playing the industry at its own game.”
In addition, consumers understand that credit has become tighter following the introduction of macro-prudential measures.
“They understand that the hurdles are higher now,” the principal said. “They don’t necessarily trust one channel over another, but they will try this portfolio approach and see what turns up. The fact that the processes are far simpler now than they used to be is making it easier.”
The DFA data shows that younger borrowers under the age of 40 are making multiple applications more than any other age groups. Mr North said that this is not surprising, given their digital literacy.
He believes that the findings shift the conversation about mortgage channels and pose significant challenges for banks and brokers.
“I bet nobody asks whether the borrower currently has a mortgage application in the system,” Mr North said. “Perhaps, that’s a questions banks and brokers need to start asking.”