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Online Application Trends

“…Over the next few years the lending landscape will change…Banks may no longer be the first point of call for those looking for credit.” (Source: British Bankers’ Association report, June 2014)

Online-Mortgage-researchThat quote is from a U.K. executive at HSBC, the world’s fourth-largest bank.

The relevance of this comment isn’t so much its literal prediction (that more consumers will start their mortgage research somewhere other than a bank). That trend is already underway.

The takeaway is that global banks are openly recognizing the shift that’s taking place in the mortgage market. They’re publicly acknowledging that mortgage consumers are increasingly comfortable with online distribution models. In turn, you can bet your boots they’ll be upping their bets on the web channel.

To secure its piece of the online pie in the U.K., HSBC recently launched a re-engineered online mortgage application. It’s a 100% paperless system that lets customers process their mortgages completely online. (Paperless technology has yet to take hold in Canada’s mortgage market.)

But how many people really want to get a mortgage online? HSBC’s research suggests a sizable minority in the U.K. (33%) plan to apply for their next mortgage online. (Sorry, no Canadian numbers here. Data on Canadian web originations is extremely hard to come by. Suffice it to say, application trends won’t be radically different on this side of the ocean.)

According to HSBC, 63% felt applying online is quicker; 54% said it was more convenient and 43% believed it was cheaper. That’s consistent with data from Carlise & Gallager, which shows that “low cost,” “trust in the financial institution” and “time-to-close” are the three most important factors to consumers in the mortgage application process.

Santander, the 14th-largest bank in the world, now finds that 28% of those starting a mortgage application complete the whole process online. That jibes with similar research from Australia. Almost 3 in 10 customers is a giant leap since the turn of the century.

Mortgage brokers internationally are acknowledging the growth of online mortgage origination. In the U.K., for instance, the majority of brokers (53%) concede that online mortgage providers will erode their market share, according to a Mortgage Solutions poll. Albeit, most don’t see it happening quickly.

But here’s an important point. Online mortgage providers don’t need to gravitate to cut-rate models to win business. Simplicity and convenience matter too. A survey from U.S.-based Discover Home Loans finds that 63% are overwhelmed by the amount of mortgage information available. Fifty-two per cent say they’d be willing to pay more for a mortgage if the process were easier to complete.

There’s much to be said for simplifying the mortgage process, offering competitive rates (not necessarily the lowest rates) and building a mortgage brand on top of that.

Robert McLister, CMT (email)