With central bank base rates looking set to stay higher for longer than expected, mortgage lenders are turning to cloud computing technology to help them improve their services to borrowers. This is enabling them to react more quickly behind the scenes and to react swiftly to changes in market conditions.
Yet delivering choice, flexibility, and speed for people who want to take out a mortgage is creating headaches for many established players in the market.
Some 80 per cent of mortgage lenders in Europe, the Middle East, and Africa (EMEA) admitted that they were delivering an “outdated” experience for their users or customers, according to a survey carried out by Whitecap on behalf of Mambu, the Software-as-a-Service (SaaS) cloud banking platform.
The vast majority of those surveyed – some 90 per cent – blamed their “legacy” and “monolithic” systems, which had no application programming interfaces (APIs), the computer programs that allow pieces of software to exchange data with each other.
That dearth of API capability led to a lack of seamless processes and flow of data between the front-end and core banking systems, and an inability to integrate easily into systems run by third parties.
“One of the biggest technology barriers we’re seeing is the use of legacy systems, which take a long time to make product changes,” explained Nick Lawler, Market Director for EMEA at Mambu.
“Whether it’s the base rate moving or the company itself moving its own interest rates, you’ve got to be able to react to the market quickly.”
While a cloud-based system like Mambu can make changes to mortgage products within minutes, it can take days, weeks, or sometimes even months to make changes on legacy platforms, Lawler pointed out.
“Another factor is being able to launch innovative products rather than simply changing existing products,” he added.
Lawler stated that Mambu’s platform contains more than 30,000 product configurations, which allow mortgage lenders to build the products they wanted, rather than being constrained by what had been hard-coded into their monolithic systems.
He also highlighted how a lack of API compatibility was acting as a further technology barrier, and restricting the number of partners with which mortgage lenders could work.
He continued to point out that the barriers created by a lack of APIs exist throughout many technology stacks, from the origination layer, through to servicing,digital banking, and on to the regulatory reporting layer.
“If you have a legacy system, then you would have to upgrade your platform in order to offer new features, products, or functionality. With Mambu you don’t have to do that. Because we’re SaaS, when you log onto the cloud, you’re instantly getting the most up-to-date version of our system,” Lawler added.
The global mortgage market is expected to grow in the coming years, despite base rates remaining stubbornly high as central banks attempt to tackle the inflation caused by high gas prices and the end of the coronavirus pandemic lockdowns.
Figures from Straits Research forecast that the global mortgage lender market will expand from $11 billion (£9bn) in 2022 to $25bn by 2031, representing a compounded annual growth rate (CAGR) of 9.6 per cent.
Rivalry to grab a slice of that growing market is fierce, with established banks and building societies facing increased competition from new entrants, including financial technology (fintech) players.
Price-comparison websites have made it easier than ever for borrowers to shop around for mortgages, remortgages or bridging loans, stoked by online and app-based lending.
Mambu’s latest mortgage report highlights the competitive nature of markets including the UK, Ireland, Australia, and New Zealand.
In order to stay ahead, it concludes that lenders need to shift from product-centric to customer-first mortgages.
Giving customers greater choice and flexibility – coupled with making faster decisions – is likely to accelerate the shift towards analysing and processing data in the cloud, rather than relying on legacy systems.
While lenders may be racing to put the best systems in place, mortgage borrowers are likely to be unaware of what’s happening behind the scenes.
“The interaction for mortgage borrowers should be seamless,” said Lawler.
“No-one knows what the technology stack is that’s powering their Apple Music,Netflix or Spotify – they just expect it to work – and it should be the same when it comes to applying for a mortgage.”
Download Mambu’s recently published report ‘Revolutionise mortgage lending with cloud-based tools: a guide to efficient loan management’ and discover how moving core lending technology into the cloud can open the doors to a resource-lite way to develop, launch and run exciting new mortgage solutions.
Nick Lawler is a senior business leader with 15+ years of experience in commercial and business development. His expertise ranges across banking, finance, and data solutions. Nick has assembled and managed top-tier sales teams at the director level to deliver high-quality customer experiences and growth opportunities. Since joining Mambu as the Market Sales Director for UK & Ireland, Nick has helped excel in the business by identifying and leveraging strategic partners for cloud core banking solutions
