Francesca Carlesi, co-founder and CEO, Molo
2020 saw a paradigm shift in the mortgage market like never before. That shift is still very much underway this year, but before we get into that, it is important for us to note just what changed last year and how the COVID-19 pandemic facilitated it.
Like industries everywhere, the mortgage market was rocked by COVID-19. Customers needed online solutions that enabled them to carry on with some semblance of normality in their everyday lives.
This was just as relevant for the mortgage industry as any other. With increased demand for online solutions, mortgage providers obviously needed digital solutions that worked across any device, any day, and at any time. However, there were also less obvious fundamental changes behind the scenes as well: with critical parts of the mortgage decision process – such as property valuations – also needing to be digitised and made remote.
These changes coupled with new customer preferences meant that the ‘traditional’ way of getting a mortgage offline was very much under threat. At Molo, for example, we have seen a 70% increase in people over the age of 45 applying for mortgage loan offers compared to the first lockdown in March. The reason for this shift is apparent: people who were previously against an online mortgage (or resisted against it) felt that they had no alternative and gave it a shot.
Unsurprisingly, those who did end up taking the plunge and getting a mortgage online ended up being pleased with an overall faster and easier experience. Not to mention actually receiving a mortgage in a time where it was sometimes difficult to get an offer via more traditional routes.
The impact on the future
So what does that mean for 2021? Well the odds are that these changes are here to stay. Those who were able to successfully get a mortgage despite being bound to their homes, are far less likely to venture down to their local high-street and seek out a mortgage via more traditional in-person means the next time they need one.
While 2020 and the reasons outlined above might be remembered as the cause of mortgages going digital, it will most certainly not be the end. These changes are here to stay and will continue to shape the mortgage sector going forward.
Changes in habits
That said, now that we know what facilitated mortgages to continue and flourish during the pandemic, we can also start to assess the impact it had on our habits.
Over the past year we have observed a myriad of motivational changes for property investors. Now, more than ever, people are considering property as a safer investment for their money. With so much uncertainty and change going on around us, investors have taken to buy-to-let properties as an attractive alternative to the stock market or savings accounts.
According to Google Trends, the search ‘how to get a buy-to-let mortgage’ saw a 5000%+ increase in popularity over the last year and was classified as ‘breaking out’ by Google. And at Molo, we can confirm from our own data that there has been a significant increase in first-time buyers searching for a mortgage.
Interestingly, it wasn’t the only change in habits that we saw. While let-to-buy mortgages are by no means new, these too saw a change in the way consumers viewed them. With new ways of working from home and less commuting, we’ve seen an incredible growth in demand for let-to-buy mortgages that allow families from big cities to rent out their home in the city and move to the countryside to accommodate a more rural lifestyle. Making use of the countryside while they are not expected to be at a desk in London, Birmingham or Reading (the cities we’ve seen the biggest interest in) five times a week.
What this means for beyond 2021
The traditional, well-established regional split of property investment is very much under threat. And that is no bad thing! We’re seeing an investment shake-up across the UK.
Moving forward, we expect hotspots like London and the South East to continue high demand, but areas such as the North West also continued to surge in interest in 2020 and we cannot see why that would stop. In fact, we’ve seen demand in cities such as Blackburn grow twice as much as the average across the rest of the UK!
COVID-19 may have caused delays and issues for some mortgage lenders, but it has also been as bigger lesson as any that more digitally advanced propositions are less susceptible.
However, above all else, the last year has really demonstrated one thing in particular in the mortgage market: not only are online mortgages a feasible proposition, but they are also the best fit for customers today.
If a business has steps in place to digitise the front-end of the customer experience, and the requisite previsions to perform back-end tasks – such as credit decisioning and case assessment – digitally as well, then there really is no reason to return to slower, traditional ways of mortgage applications once the pandemic is over.
While predicting the future is impossible, one thing we can say for certain is; there has never been a more interesting time to be working in the mortgage industry.
