Mortgage efficiency survey 2014

iress.com

Henry Woodcock

Principal Mortgage Consultant

October 2014

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IRESS

• IRESS produce innovative, sophisticated solutions for mortgage, wealth management and

financial markets participants. We are a global business with operations in Australia, New

Zealand, Canada, South Africa, Asia, and the UK.

• Our products and solutions provide transformational business benefits and support a diverse

range of roles across front, middle and back-office functions. Our solutions are tailored to suit

the individual needs of our clients and we deliver services across all distribution channels and

technology devices. In the mortgage sector our solutions include:

• IRESS Mortgage Sales & Originations (MSO) - an end-to-end, multi-channel mortgage

solution for lenders. This solution is designed to improve the efficiency and service delivery

of our lender clients - currently 25% of all UK mortgages are transacted through it.

• IRESS Trigold - a mortgage sourcing system now used by over 15,000 mortgage

intermediaries. Presently 65% of all intermediary mortgage business is being sourced

through Trigold.

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Contents

1. IRESS Mortgage Efficiency Survey Overview

2. Key Findings

3. Buyer types & distribution

4. Sales channels

5. Originations

6. Social Media - to tweet or not…..

7. Mobile Futures

8. 2015

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Survey overview

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Survey overview

• Purpose – to provide insight into the

quality and efficiency over the whole

of the mortgage sales and origination

process

• In its 3rd year enabling year on year

trends and comparisons

• 2014 - 10 Participants with over 66%

share of gross mortgage lending in

2013 equating to just under £120bn

of mortgage loans

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Key findings

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Key findings - channels

Intermediaries

More than half

mortgages sold - 51%

Banks 63% Mutuals

Branch

Branch sales dropped

to less than ¼ - 26%

Banks 18% Mutuals

Telephony

Just over 10% sold via telephony - 15% Banks 14% Mutuals

Consumer

On-line sales dropped slightly to just under 5%

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Key findings - originations

DIP

Average accept levels 53% intermediary to 60% telephony & 66% branch

Offer

Highest in intermediary 70%, 64% telephony, 67% branch and 38%

consumer

Completion

Highest in intermediary and telephony 89%+,

branch 68%, consumer 46%

Trends

FTB and Equity release growing with BTL showing a brief

plateau in 2014

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Buyer types

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Buyer types

First Time Buyer

• Banks sold 7% more first time buyer

mortgages and nearly 13% more Buy

to Let mortgages than mutuals.

• No Mutuals in the survey have sold Equity

Release mortgages whereas 9% of bank

mortgage sales were for Equity Release.

• Mutuals sold a higher percentage of

traditional loans – Moving Home and

Remortgage, respectively 9% and 8%

more than banks.

• Over the three years of the survey, perhaps

not unexpectedly, the First Time Buyer and

Equity Release buyer types have increased

year on year, with Buy to Let appearing to

reach a plateau between 2013/14.

Moving Home

Remortgage

Buy to let

Equity Release

Second Home

1

2

3

4

5

6

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FTB – Banks v Mutuals

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Banks Mutuals Tier 1 Tier 2 Tier 3 Total

First Time Buyers

First Time Buyer 2012 First Time Buyer 2013 First Time Buyer 2014

Banks have increased lending by 5% and

Mutuals by 4%.

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FTB - Tiers

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Banks Mutuals Tier 1 Tier 2 Tier 3 Total

First Time Buyers

First Time Buyer 2012 First Time Buyer 2013 First Time Buyer 2014

The biggest increase has been

in Tier 1 lenders with an

increase of nearly 10% to just

over 25%, with Tier 2 lenders

having a minor increase from

2012, but Tier 3 lenders

showing a 6% drop.

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FTB – Survey Average

0.00

5.00

10.00

15.00

20.00

25.00

30.00

Banks Mutuals Tier 1 Tier 2 Tier 3 Total

First Time Buyers

First Time Buyer 2012 First Time Buyer 2013 First Time Buyer 2014

The overall survey average shows a 4%

increase in First Time Buyer lending.

Recent figures from the CML continue to

show growth in First Time Buyers, across

all regions of the UK.

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Distribution

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Distribution

Intermediary distribution remains a key channel for many lenders

with mutuals selling over 63% of mortgage via intermediaries and banks selling 52%.

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Distribution trends

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014

Intermediary Telephony (Direct) Consumer (Internet) Branch

Core Distribution 2012-14

Banks Mutuals Total

Looking at intermediary distribution between 2012 to 2014 in overall terms

there was a slight dip in 2013, but the striking trends are that mutuals selling

via intermediaries dropped by nearly 10% but banks increased intermediary

lending by over 12%.

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Sales channels

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Sales channel

Channel capabilities – quote, KFI, FMA, Case Tracking, Offer…. are highest in Intermediary and

Telephony channels in 2014 and across the 3 years of the survey

Cases to Offer

Cases to Completion

Individual lender

best to offer

87% Telephony & Branch

Individual lender

worst to offer

15% Consumer

Individual lender

best to completion

94% Telephony

Individual lender

worst to completion

46% Consumer

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Sales interview times

MMR Advised Sales - Elapsed Hours Results from IRESS MMR Lender Analysis 2014

1 2 3 4

Best lender

Worst lender

Review Average

Hours

WAYS TO IMPROVE EFFICIENCY:

• Automate where possible - eID, AVM (remortgage), Address Targeting, once &

done data capture, eliminate redundant data

• Auto-generate Reasons Why/Recommendation Letter

• Single advised journey

• Offer self-service and retentions on-line

• Enable brokers to process rate switch, FA, etc.

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Originations pipeline effectiveness

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Average time to offer

Best individual lender <5 38% <10 65% <14 79% <30 97%

Year <5 days <10 days <14 days <30 days

2012 Average 26% 52% 78% 94%

2013 Average 13% 35% 56% 78%

2014 Average 8% 23% 44% 80%

2014 Best 38% 65% 80% 100%

Offers

Across the three years, the percentage of cases going to offer has declined across all three bands to 14 days or less.

The average for 10 days and under has dropped from a high of 52% to just 23% this year.

MMR changes and the need for more stringent affordability and plausibility tests are the most likely factors behind the decline.

Some lenders have improved though, with one lender issuing 65% of offers in ten days or less.

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Social media

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Social media usage

Lenders are starting to view social media in a more positive light

2012 2013

2014

Twitter has grown year

on year from 10% to 50%

of lenders using actively

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Mobile futures

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Mobile futures

Lenders only just beginning to tap into this market

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2015

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Key 2015 questions

MMR

First full year of MMR. Time to offer? Elapsed sales time?

Technology

Will mobile take off, will social media be more than an alerts?

EU MCD

What will be the impact of the

EU mortgage credit directive?

Trends

Will trends change - impacts of rate rise, lead up to elections?

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Intermediary systems survey

The survey is comprised of three elements:

1. Lenders - an Intermediary systems survey, designed to benchmark intermediary lender

systems in terms of functionality across three elements of the mortgage sales process: the

broker extranet home page; quote, apply and submit; and finally post submission.

2. Intermediaries – a survey of core functionality and process

3. Intermediaries – a benchmark survey of each lender’s portal in terms of usability

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In conclusion

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• In the first half of 2014 the effects of regulation and government schemes on the mortgage market have

been self-evident. Government schemes such as Help to Buy have certainly boosted the market, in

particular for first time buyers. Though some market commentators are unsure if the measures are

providing the best outcomes for the market and consumers alike.

• Regulation has impacted the mortgage sales and origination process. The Mortgage Market Review final

rules came into force in April and this has produced a short term bump in lending volumes, but also

ongoing change in both the elapsed time and complexity of the sales interview process. For some

lenders it has also increased the time to provide an offer.

• However, the market continues to grow, with the CML revising their 2014 forecast to £208bn, the first

time lending has been over £200bn since 2008.

• As we move toward 2015 and beyond, further regulation will impact the market and consumers in the

form of the EU Mortgage Credit Direct. The directive will provide a challenge for lenders with just a bare

12 months to design and implement the required changes.

• Aside from those challenges, it is clear from the findings in this survey, that investment in technology,

improvements in efficiency and cost savings will continue to be at the forefront of the minds of lending

executives across the market.

• Mobile technology, social media and customer service are converging demands that will require lenders

to innovate both technology and process to be successful in this changing mortgage landscape.

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Thank you

iress.com

M: 07778 178 220

henry.woodcock@iress.co.uk

Henry Woodcock

http://uk.linkedin.com/in/henrywoodcock/

@henry_woodcock