Digital mortgage

“Disruptive” digital mortgage lenders on the rise

A number of digital mortgage lenders have entered the market over recent years, such as Molo, Habito, and Atom Bank, with more set to follow. Starling Bank recently bought Fleet Mortgages and Monzo are expected to begin lending soon.

These digital mortgage lenders, described as “disruptive”, are aiming to simplify the process and use accessible technology in order to offer a favourable service to consumers.

Alan Fitzpatrick, VP lending operations at Habito, said:

“We found six years ago through our brokerage that mortgages had barely changed in decades. Not much was standardised, nobody was really incentivised to help the next person in the chain.

In 2018, we got our lending licence from the FCA, and set out to solve the mortgage products themselves, not just the experience around them. We wanted to build something new, and something that allowed for a fully integrated and digital experience – to the benefit of consumers.”

Echoing the sentiment of Fitzpatrick, Francesca Carlesi, chief executive and co-founder of Molo, said:

“The interest and growth we have seen off the back of our buy-to-let product has confirmed our belief that there is a need for a direct, fully digital residential product within the UK market.”

Such a product will likely use data and analytics to create a personal, accessible service. According to Maria Harris, director at Digital Cat Consultancy, this is something the big banks are “struggling” with.

The types of mortgages being offered are also differing – not just the service. Molo and Habito are offering terms of up to 40 years, perhaps due to funding models. According to Maria Harris, these lenders are aiming to create a “new market segment” through offering such products.

Fitzpatrick, Habito, said:

“We’re not interested in creating carbon copies of low rate, 60 per cent loan to value (LTV) two-year fixed deals – there are hundreds of those out there already, and we don’t believe they serve all homeowners well.

We have the tools to craft an unlimited array of disruptive products for customers and we have ambitions to address the most significant home-financing issues of our generation.”

Despite this, Greg Cunnington, chief operating officer at LDN Finance, said the longer-term fixed rate products are not yet popular due to their cost. However, the service appears to be resonating well with consumers. Speaking on his service from Atom, Jamie Lennox, director of Dimora Mortgages, said:

“The application process was slick, and the underwriting was simple with the offer being produced quicker than most high street lenders. So, first impressions have been positive.

Since Covid, we’ve seen a real mixed bag around this and are currently seeing some high street lenders take up to 14 working days to assess an application for the first time. With these new lenders coming to the market with the aim of using tech to their advantage to streamline the process this can only shorten the time it takes for a client to have a mortgage agreed and in doing so reduces stress.”

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