Incumbent mortgage brokers John Charcol and Countrywide will face a strong challenge to their market shares over the next five years from digital hybrids such as Habito and Trussle, according to a recently released report on the retail banking sector.
UK retail banking: mortgages
The 2018 Retail Banking Insight Survey report found that 70% of first-time buyers (FTBs) of mortgages are millennials, most of whom are very comfortable using digital channels, with 57% of those surveyed saying that if they were applying for a mortgage today they would do so via a digital channel. Conversely, only 37% would opt to speak with a bank representative in-branch and 5% would use a call centre.
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Indeed, mortgage applications direct through a branch or via telephone is now the preference of a minority of millennials, the report found.
After years of unfavourable conditions, the report said the tables have finally turned for FTBs, with government support combined with rising wage growth and slowing private rental growth helping a growing number of individuals get on the property ladder.
Help to Buy ISA
The government’s Help to Buy ISA scheme has resulted in the median age of FTBs declining to 27, compared to 30 for those not using the scheme.
UK Finance, a trade association for the financial services sector, recently published figures showing that the number of mortgages issued to FTBs reached an all-time high of 96,200 in Q3 2018.
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By GlobalDataIn addition, changes to the buy-to-let sector have had a material impact on the supply of housing, benefiting both existing homeowners and FTBs.
The combination of improved market conditions and government support, as well as millennials’ strong desire to digitally self-serve and seek advice, provides new entrants such as Habito and Trussle with strong growth opportunities. Both follow a hybrid model, whereby customers can digitally self-serve up to key points in the application and are then contacted by a representative to reassure customers and provide support on key decisions.
Allowing customers to digitally self-serve provides them with transparency and confidence that they are getting the best deal currently available to them. Both brokers offer complete control over the mortgage journey, allowing users to track each and every stage of their application and speak to a representative through a live-chat tool.
The ability of customers to digitally self-serve but interact with advisers when they have queries or need to make qualitative judgements is better suited to the channel and buying preferences of millennials.
