Recent years have seen a significant increase in the success of online mortgage lenders and mortgage brokers, with more and more house-hunters looking to bypass the arduous mortgage process. Financial technology- ‘fintech’- promises an alternative that is quicker, easier and more affordable, enticing buyers away from traditional lenders.
As a mortgage broker, Blutin Finance provides an easy process of meeting with customers and applying for a home loan. A welcome change for home-buyers looking for a streamlined process. Their branding hinges on the idea of dragging the archaic mortgage lending system into the modern world through digitization. Speed and transparency are promised and a cursory glance at their reviews suggests this is what customers get. Ease, clarity and support make up a significant portion of the praise, showing how websites such as these have tapped into a market crying out for simplified processes.
The effect is global, with companies like Better, a New York based lender, succeeding off the back of their market research. By focusing their marketing on accessibility and cost, they have responded to the long-held frustrations of homebuyers around the mortgage process, focusing on simplicity and eliminating unnecessary fees to undercut non-digital lenders.
On the success of this approach, the figures speak for themselves; in 2018 Better reached $1 billion in total funded loans, only three years after they completed their first 100% digital loan.
After securing $160 million in Series C funding in 2019, Better has proved itself, and the wider digital mortgage lending industry, to be a viable choice for homebuyers that is firmly established in the lending market.
While it may seem that online companies have the potential to erase traditional lenders, the immediate risk to established physical lenders is low. Instead, it is more likely that the industry will see a fusion of online and traditional lending.
Talking to FinTech Magazine, Natalia Roshchupko, CEO of Molo, predicts future partnerships between banks and digital lenders. She acknowledges the longevity of traditional banks but expects their inability to quickly innovate will eventually require them to join forces with their digital counterparts.
Roshchupko envisions a merging of services where customers of traditional banks can reap the benefits of an automated online service that is streamlined and customized, a unity that will allow the market to flourish and provide customers with the best possible service
If this were to happen, homebuyers could reap the benefits of online lending while avoiding the trepidation of engaging with a business model that remains relatively new. Online lenders would gain wider visibility and more mainstream appeal while banks and other physical lenders could engage effectively with their competitors, allowing them to evolve at a more realistic rate.
Even if the physical lender is here to stay, the face of the mortgage industry has been permanently changed by the emergence of fintech. As the market adjusts to a post-pandemic state, the industry will more than likely feel the effects of the digitalization of the last year.
With 64% of participants in a survey by ICE Mortgage Technology stating they believe getting a mortgage online would make buying a home easier than an in-person process, it is clear that the desire for the simplicity fintech offers remains high. The last year has seen consumers shift their focus online in almost every area and, in a post-COVID market, the mortgage industry will most likely follow suit. As people increasingly look online for services, fintech and the home buying possibilities it allows will be more in demand than ever.