Rethinking the mortgage journey

Digitisation has already touched almost every aspect of our lives – from the ways we work and socialise to how we do our shopping and banking. It's therefore no surprise that consumers expect a similar online experience when they set out on their home-buying journey.

However, this presents a significant challenge for lenders: how to digitise their legacy platforms and processes to meet rapidly evolving customer expectations. This challenge is exacerbated for lenders whose organisations have already digitised many elements of their personal banking services. This can result in a mismatched customer experience, depending on which products the customer is engaged in.

"Large financial institutions can struggle to bring together all the data they need to really understand their customers,” said Milena Malev, CoreLogic Asia Pacific's General Manager of Financial Services and Insurance. "On top of that, many are not leveraging the property information and other data available to them as effectively as they could to support their customers' home ownership journey.”

As a result, some lenders still take weeks to collect and validate the documentation they need to approve a loan. And the larger the institution, the more difficult it can be to streamline processes to keep up with consumer demand and regulatory requirements.

"Across the market, we're currently seeing a significant volume increase in refinancing, for instance,” Milena said. "Coping with this volume is a fundamental challenge for big lenders, as their legacy systems can limit their ability to easily consume the necessary data. What's more, our data indicates that close to half of mortgage volume comes from advisers, so lenders are racing to meet expectations so they can retain their business, while at the same time keeping up with changing consumer needs.”

Despite these barriers, some banks are heavily investing in capabilities that can deliver an end-to-end digital home-buying experience for their customers. We look at three key stages of the mortgage process and the role that property data and digital solutions can play at each stage.

Stage 1. Engaging the customer in a digital world

Lenders who have access to detailed customer and property data can become a trusted partner in each borrower's home-buying journey. Understanding a customer's property needs and the drivers behind their financial decisions can lead to deeper conversations about what's truly important to them.

"By sharing detailed property information with the customer, tailored to their specific needs and the stage they're at in the home search journey, the lender can nurture them through the process and help them find the right home and loan,” said Milena. "It's about building a personal relationship.”

Stronger customer relationships can help encourage home buyers to engage with their bank from the outset, and seek guidance as they explore their property and financing options. A fully digital mortgage process also enables lenders to set customer expectations early on.

"By drawing on high-quality property insights, lenders can have more meaningful conversations with each customer about their property needs – including how much they need to save and where they want to buy,” Milena said. "Guiding the customer through their home search helps to position the lender as a property expert rather than simply a finance provider, which can have enormous benefits for their business.”

Stage 2. A data-powered application process

Having access to comprehensive property data can also help customers make more informed decisions about their purchases. What's more, providing a 360-degree view of individual properties helps personalise the experience for each customer.

"We source data from a range of sources and augment it using a range of predictive modelling techniques including machine learning to determine a property's key attributes, and we now have coverage of these attributes for most New Zealand properties,” Milena said. "We've developed and refined this capability over many years, which has greatly contributed to the depth and breadth of our data.”

One of the most frustrating aspects of applying for a loan can be the amount of time-consuming paperwork involved. But by using digitised forms pre-populated with key information about the customer's financial situation and enhanced with data on their chosen property that the customer can simply validate, this administrative burden can be greatly reduced. For example, Rental Automated Valuation Models (AVMs) can automatically estimate rental amounts and support serviceability calculations, so lenders may not need to ask for lease agreements.

"Historically, a lender would collect all the information about the property and individual, and then conduct an assessment,” Milena said. "Now you can bring those considerations from the back end to the front end, so customers find out the decision about the property in a matter of minutes, instead of waiting for days. As open banking continues to develop, it will become even easier to combine property data with the borrower's credit information, which will streamline this process even further.”

For example, CoreLogic has access to comprehensive property and valuation data on more than 1.7 million properties across New Zealand, spanning a period of more than 30 years. Through our digital mortgage solutions, this data can help lenders provide timely decisions to customers on their loan applications – giving purchasers greater speed and certainty in their property transactions.

Surfacing property data into the early stages of borrowing can also help lenders identify any property exceptions or potential property characteristics that could impact the amount they're willing to lend or the property they're willing to pre-qualify. This can also remove uncertainty for the customer along the way. Key characteristics might include inappropriate property use, property safety issues, and properties in high-density areas or known natural hazards, depending on the lender's risk appetite.

Effective risk management is a vital part of the home-buying process, both for lenders and borrowers. Using a comprehensive property data and valuation ecosystem can not only streamline the valuation process and maximise digital valuations; it can also help determine the right valuation type for risks, while eliminating manual processes and human error. This can result in significant time and cost savings without going up the risk curve.

Milena commented: "Since the emergence of digital valuations around 15 years ago, they've continued to evolve with improved use of property data, platforms and virtual valuation tools. New Zealand was an early adopter of digital valuations in the banking and finance industry, with up to 80% of all valuations now being completed digitally, depending on the lender's digital capabilities and risk appetite.”

Stage 3. Ongoing engagement

A fully digital, data-driven mortgage process doesn't end at loan origination. It can also give lenders the tools and information they need to support the customer throughout the entire home ownership lifecycle.

"It's all about maintaining contact with the customer,” Milena said. "For example, dynamic equity calculation can help customers stay up to date on the value of their assets and how much equity they've built up, based on a dynamic estimate of what their property is now worth. By tapping into a range of data about the customer and their property – for instance, whether they're listing a property for sale or rent – lenders can strengthen the relationship over the long term by helping the customer prepare and secure finance for their next property purchase.”

With the ability to monitor different stages of the property lifecycle, lenders can even play a proactive role in helping customers' make confident financial decisions at every step in their home ownership journey. Lenders who are able to automate this process with their existing home loan portfolio have a genuine opportunity to build a stronger connection with their customers and systematically reduce refinancing churn.

"If a customer wants to renovate, buy an investment property or top up their loan, the lender can have the tools to better understand in advance the value of the property, the customer's financial circumstances and their capacity to repay,” Milena said. "Then, the process can be completely automatic, so a lot of those decisions are streamlined to a point where they don't take any time at all.”

CoreLogic's digital mortgage solutions are one example of how sophisticated analytics, platforms and digital tools can enhance the property experience for both future and existing home owners and for lenders – speeding up valuations and approvals by harnessing best-in-class property data.

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