Artificial intelligence comes to mortgages but would YOU feel comfortable taking financial advice from a machine?
Getting a mortgage is one of the few customer experiences that has, until now, been left pretty much untouched by the digital revolution.
You still have to talk to someone on the phone, most likely book an appointment, and then meet with a real person face to face.
But a small number of firms are starting to shake this up by going online.
Habito: The world’s first artificially intelligent digital mortgage adviser?
This week UK tech startup Habito has launched what it claims is 'the world’s first artificially intelligent digital mortgage adviser'.
But what exactly does that mean? Are we talking robots and instant mortgages or is this simply a first step in the digital direction?
The answer is it is both. Habito's digital mortgage adviser does have the capacity to interact with you online through an interface that is very much like iMessage but it isn't going to produce a mortgage offer the same day.
At the moment its messaging chat is built on a 'decision tree' - essentially meaning that interactions are restricted to very specific responses based on how you answer a series of questions.
Habito chat is built on a 'decision tree'
At the end of about a 10 minute session where you and the DMA - digital mortgage adviser - exchange messages about the sort of mortgage you want and can afford, it will make a recommendation that is fully regulated and advised.
It's much more advanced than simply going online to one of the comparison sites and scrolling through for the best rate: the idea is that Habito will tell you not only the best value mortgage for you and your specific circumstances, it will also make sure it's the right type of deal.
In other words, it's not going to suggest you fix your rate for ten years if you're thinking of moving house in five and would therefore incur potentially hefty early repayment charges.
Importantly, Habito's technology also takes into account the myriad of constantly changing criteria that lenders use to control the number of mortgages they approve.
Daniel Hegarty, chief executive and founder of Habito, explains: ‘The whole idea was borne out of the experience my wife and I had when trying to get our first mortgage. I just couldn’t believe how archaic and difficult it was in a world where it’s possible to do nearly everything online – it was a nightmare.
‘The whole industry is still very complicated and every lender’s system is different which is probably the reason mortgage advice has taken so long to adopt a digital form but we think we are beginning to change that.'
Not quite fully automated...yet
So far so good but after the product recommendation stage, the Habito system hands you off to a mortgage broker with whom you have a 15 minute phone call to confirm that the digital advice is definitely right for you.
This is because mortgage lenders in the UK are notorious for having multiple, nebulous and often ancient technology systems that simply don't have the ability to interact digitally with other systems.
As a result, Habito is currently forced to input customer data manually for whichever lender it has recommended and then go through the application and approval process in the traditional way - which can still take up to three months to complete.
But - and this is where things could begin to get more interesting in future - the system built by Habito is learning every time it interacts with a customer.
The current hand-off to a person who checks the digital advice is not necessarily going to stay - the firm says it's doing this at the moment to ensure borrowers get the best mortgage advice while the technology learns and establishes experience.
And eventually it is theoretically possible to feed the borrower directly from the digital adviser into the lender's application system and then receive an approval in principle without the need to deal with a human at all.
Hegarty adds: 'We haven’t yet got to a stage where the Habito system can directly interact with lenders’ application technology but it is something we have had conversations with lenders about and they’re keen to develop their digital banking offerings, so we will see how that progresses.
‘Ultimately we want the customer to have as easy and hassle-free an experience as possible. Buying a house is stressful enough without adding to the difficulties by insisting on a three hour face-to-face mortgage interview. In our view it’s just not necessary.’
Trussle does it too
Habito may be the most recent to launch but it's not the first firm to attempt to automate mortgage advice. In December last year Trussle launched its own version of online mortgage advice, also automated up to the point of application and supported by real advisers.
First step: You enter the information in green and Trussle spits out how much you can borrow
Its founder, Ishaan Malhi, tells a similar story to Hegarty: 'Trussle was really borne out my own frustration with the whole process of getting a mortgage - I have a background in banking and finance but found myself completely at sea with a mortgage.
'All I wanted to know was how much I could borrow and what I'd need to repay each month but the tools just weren't there. It also seemed to me that the whole mortgage advice industry hadn't changed in 20 to 30 years and that this was just widely accepted as a problem.'
Trussle sounds very similar to Habito, with the first part of the process and product recommendation done online whenever suits you. Having filled in your details, Trussle's technology (also AI-enabled like Habito) assesses your eligibility for a mortgage, how much you can afford and what the most suitable deal is for your circumstances.
'At the moment we are using a balance of online automation and real people to deliver a service we think is second to none,' says Malhi. 'We are also training the technology right now so that eventually the system will be able to predict what lender and what mortgage you need based on less and less information and more on customer profiling.'
Malhi: The whole mortgage advice industry hadn't changed in 20 to 30 years and this was just widely accepted as a problem
One borrower who used Trussle earlier this year had this to say: 'I had the option of either waiting three weeks for an appointment with a high street bank mortgage adviser at an inconvenient time of day, or giving Trussle a shot. Needless to say I made the right choice, receiving a mortgage offer before the bank in question could even arrange an initial appointment.
'The process was incredibly straight forward from start to finish. Ryan and Holly worked very hard to keep me updated every step of the way, even replying to emails over the weekend. A personal touch was present throughout, which makes a refreshing change to the incredibly unhelpful call centres of the high street banks.'
Trussle's service is a balance of automation and advice from a real adviser - but you can track your
The Smart Mortgage Guide
Steve Shotts, of Horizon Financial Solutions, is another mortgage broker determined to stop putting the needs of lenders ahead of customers', instead serving them in the way they want to be served.
He hasn't gone down the route of online advice, preferring to interact with customers and process the mortgage application himself. But he agrees with Malhi that there is a huge knowledge gap among customers who need to apply for their first mortgage.
The app isn’t designed to do the whole mortgage for you but it should help get buyers ready and speed up the process
‘I launched the Smart Mortgage Guide app in June this year and we’ve had an overwhelming response with over 100,000 people downloading it in the first few weeks – clearly there is a real appetite from people looking to borrow to understand the whole process a bit better from the outset,' Shotts says.
The SMG app doesn't require any personal details if you'd rather not share these but it will give you a comprehensive understanding for what you need to do to be approved for a mortgage.
Shotts explains: ‘Organising a mortgage isn’t that hard but it has been pretty opaque for borrowers – the process is different for practically every lender and that makes it confusing. It can seem complicated when in fact there are a few fairly basic steps you can take to make yourself a really good prospect for a lender when you apply.
‘The app isn’t designed to do the whole mortgage for you but it should help get buyers ready before they sit down with a broker or their lender. People clearly want to understand the process better and it’s my job as a broker to help facilitate that as much as I can.
Uber, Airbnb and Deliveroo have transformed customer experience
‘Lenders’ mortgage calculators are pretty lousy – they give a very rough estimate and you have absolutely no idea if they’ll actually lend to you. The SMG will give you a much clearer idea of whether you actually qualify for a mortgage and how much you can realistically borrow. That’s information you need before you make an offer on a property.’
Uber, Airbnb and Deliveroo have transformed customer experience, putting ease of transaction as the first priority. Shotts sums up the need for change in the mortgage application process - still wildly far behind the digital options available in transport or retail.
‘I think there’s a real shift in the way people transact now – it’s all mobile and it’s much more immediate,' says Shotts. 'If I start finding out about my options for a remortgage for example, I don’t want to get half way through and then realise I can’t get it done. I want the process to be easy – it isn’t at the moment but we are trying to change that.'
When it comes to managing your mortgage Santander believes you should be able to do it all online - just like booking a flight or ordering your weekly shop
Santander takes a step online
Lenders are beginning to take greater steps online as well. This week Santander launched an online remortgage service which it claims will take as little as 30 minutes to complete. If you know the deal you're after, the service allows you to apply for it online and be approved without speaking to an advisor.
The catch is that it's for existing customers only and it won't give you a product recommendation - you'll need to do your own research and work out what product type you want as well as what rate. Additionally, you will be restricting yourself to a Santander deal.
The bank's Miguel Sard said: 'More and more is being done online, from small things like ordering shopping to bigger things like booking flights. When it comes to managing your mortgage, it shouldn’t be any different. We know that many people already look around for the best deals online, this tool takes it a step further, we are empowering customers to secure their mortgage online, at a time and place that suits them.'
A PLACE FOR OLD SCHOOL ADVICE
Corby Macdonald, director of mortgage adviser Vickers Young, believes that automated digital mortgage applications are an admirable objective but they can never replace the value offered by a mortgage broker.
'The mortgage advice market is archaic and does need to modernise but I don't think that people looking to buy their first home are ready to do the whole mortgage online.
'There is still a place for face to face advice with a person to hold your hand. I think brokers should be adapting the way that we deliver that face to face advice so that it's more in line with the way customers want to interact.
'It's for that reason that I use tools like Skype and Facetime to talk to my clients face to face but at a time that's convenient for them.
'Automating advice is never going to unpick lenders' foibles - just last week I had a first-time buyer who was offered £49,000 by one lender and then £78,000 by another just because of the quirks of each one's criteria. The basic thing borrowers want to know is how much they can borrow and understanding the different lenders is what brokers do.
'Unless all mortgage lenders support the technology from firms like Habito and Trussle, they're never going to be able to replace face to face advice.'