Open Banking hits the market tomorrow – which will allow companies to access peoples’ bank or building society data once given permission by the customer.
Nine of the biggest UK lenders – Lloyds, RBS, Barclays, HSBC, Santander, Danske, Allied Irish Bank, the Bank of Ireland and the Nationwide Building Society – must share transaction history data if requested in a standard format.
The consensus from industry professionals is it will end up streamlining the mortgage process once the changes effectively bed in.
Henry Woodcock, principal mortgage consultant at IRESS, said: “Open Banking should mean lender and broker systems will be able to access income and expenditure banking data directly, probably through aggregator services, without the need for paper.
“It could also enable mortgage underwriting to look at patterns of income and expenditure over a period of months, rather than say a P60 snapshot from nearly a year ago.
“We would expect to see this sort of pattern of change evolving from a slow start in 2018, with adoption increasing as trust is proven and security shown to be robust.
“Over time, it will be a significant digital enabler, removing paper and time from the application process.”
Daniel Hegarty, chief executive of digital broker Habito, said Open Banking will push financial services into the 21st Century.
He added: “It will enable consumers to receive more services, get greater product choice and better-priced deals – all aligned to their individual circumstances.
“In the case of mortgages, being able to base borrowing calculations and applications on a customer’s data that is standardised and easily shareable between banks, lenders and other institutions, will remove much hassle for consumers.
“It will ensure that mortgage ‘illustrations’ and decisions in principle, reflect the likely lender decisions from the get-go – avoiding any disappointment for customers when it counts and save them money, time and stress.”
Ishaan Malhi, chief executive and founder of ‘online’ mortgage broker Trussle, reckons the new regulation will help more people switch provider.
He said: “Open Banking is finally putting people back in control of their financial data. They’ll soon be able to enjoy a significantly more personal and rewarding relationship with their financial services providers, but perhaps nowhere more so than in the world of mortgages.
“By allowing brokers and lenders ready access to data, switching from your current mortgage deal to a more suitable one will become simpler, quicker, and perhaps even enjoyable!
“This will play a big role in eradicating switching inertia, which we know is costing the UK’s homeowners around £10bn a year.”
He added: “Open Banking should in time also help lenders and brokers build a more accurate picture of their customer’s personal finances, allowing them to be more flexible and adaptable when it comes to decision-making.
“For example, a first-time buyer can’t currently submit rent payments as proof of credit worthiness, but with seamless data-sharing, this could very easily become a reality and help thousands begin their homeownership journey.
“By putting all companies on a level playing field, we should also see more competition.
“It’s unlikely we’ll see significant change instantly, particularly as a number of large banks have missed the implementation deadline, but I think Open Banking has the potential to significantly change the mortgage landscape for the better.”
The Open Banking regulation is from the Competition and Markets Authority.