Dan Hegarty, CEO and founder of Habito, explains why he thinks technology can – and should disrupt – the mortgage industry.
Mortgages. Nobody wants to think about them. Nobody wants to talk about them.
It’s a £90bn industry and one of the cornerstones of our entire economy – but it remains such a horrifyingly complex and unpleasant spectre that we’d all rather just pretend it wasn’t happening.
The origins of the mortgage give you a pretty big clue to the experience. Did you know that the word mortgage comes from the late Middle English: from Old French, literally ‘dead pledge’, from mort (from Latin mortus ‘dead’) + gage ‘pledge’? Or that the first mortgage came about in 1766 and was paid using deerskins? If you have gone through the mortgage process recently, the notion of a ‘death pledge’ is going to feel pretty familiar.
Habito and YouGov commissioned some research over the last few weeks to try and get to the bottom of why mortgages remain such a blind spot for so many of us. We found out that 33% of homeowners in the UK do not know even the most basic details of their mortgage. Our conversations with homeowners lead us to believe that the process of getting a mortgage is so traumatising and unpleasant that people can’t even bear to think about what they’ve committed to.
If that wasn’t bad enough, research commissioned by HSBC found that 1 in 4 homeowners on a SVR (that means a standard variable rate, which is the rate you switch to after your attractive introductory rate comes to an end) could save between £3000 and £4000 a year in interest payments. Yet, the process of trying to do that is still putting people off. That’s a family holiday or a new kitchen, and consumers still can’t face it.
We’re all rewarding brokers and lenders for having a broken process by staying on bad deals and keeping our collective head in the sand. In many cases paying thousands of pounds in unnecessary interest per year. It’s no wonder the mortgage industry hasn’t evolved much in the last 30 years! It’s time for that to change.
Tech is key
How is that change going to come about? We believe technology is the answer, just as it has been for other areas of financial services where powerful and user-friendly software is dramatically improving companies’ ability to serve consumers.
Think Funding Circle in marketplace lending, TransferWise in money transfer, and PayPal in payment processing. It’s time to bring mortgages into the 21st century.
The theme of unbundling banks’ core services is quickly transitioning from speculation to reality. For now, banks and lenders will continue to control and maintain the rails on which our financial lives transit – but consumers are making it clear that they won’t accept substandard products and user experience any longer.
The mortgage market has held out longer than most due to the complexity of the product and the number of stakeholders, but it can and must change.
It’s an extraordinarily exciting time to sit at the intersection of technology and finance.
In this digital age is now possible to build a different future for mortgages, where the toil and the horror is removed from the process along with all the jargon and misinformation.
Consumers deserve a simple, quick and transparent process and they certainly don’t deserve to be penalised for the failings of lenders and brokers.
Death to the death pledge!