Cost pressures, inefficient processing, lengthy time to offer, and fluctuating volumes – these are just a handful of the challenges facing mid-sized buy-to-let (BTL) mortgage lenders. The UK BTL mortgage market has shrunk for the first time since the launch of products in 1996, with the number of new BTL mortgages granted by lenders plummeting by more than half in just over a year.
This has been triggered by soaring interest rates and broader cost of living pressures, which have served to dilute demand among existing and prospective landlords. Market volatility is something that all lenders must navigate from time to time but it’s impossible to escape the feeling that a fresh approach is required in order to deliver long-term success.
Regulation is an ever-present challenge, however, with compliance costs increasing year-on-year, the strain on mid-tier banks is becoming apparent. Driving operational efficiency is another major consideration for BTL lenders. It is estimated that mid-sized lenders spend around a third of their operational budget on IT infrastructure, underscoring the daunting task of managing operational costs while pursuing tech advancements.
Meanwhile, arguably the most pressing challenge is that of meeting customer expectations. For mid-sized lenders who are competing against well-resourced larger banks and also agile fintech start-ups, realising opportunities for future growth in the BTL sector may feel out of reach. But help is at hand…
Introducing a ‘shared services’ approach
In a nutshell, shared services consolidate ‘back office’ or ‘non-core’ business operations – allowing organisations to focus on delivering on its key goals.
The benefits of shared services include cost-effectiveness, improved service levels, standardised processes, and best practices, not to mention boosted customer satisfaction. Most of the benefits are achieved by consolidation of systems, redefined processes, and digital innovation.
Viewed through the BTL mortgage market lens, it’s easy to see why such a model would appeal to mid-sized lenders.
Larger competitors have scale in mortgage processing operations, meaning they tend to face lower costs and are better placed to take advantage of latest technologies. One of the best ways for smaller rivals to compete is to embrace shared services and pool their mortgage processing operations with lenders of a similar size.
Firstsource has teamed up with artificial intelligence (AI) experts Digilytics to offer a ‘Mortgage Shared Services’ solution, which provides a one-stop shop for mid-sized lenders – from receiving the BTL mortgage application to delivering the funds and future servicing of the account.
Eliminating the need for fragmented solutions and internal resource allocation, this shared services solution includes numerous features that will enable embattled lenders to respond to the various challenges posed by the BTL mortgage market.
AI document processing will not only reduce the time it takes to review and action an application, it will also increase accuracy and minimise the potential for fraudulent activity.
A ‘bring your own process’ workflow is configured for each lender’s specific requirements and is fully integrated with a system of record.
As a global business process management (PBM) provider, Firstsource is ideally positioned to deliver services from contact centres across the UK, as well as cost-effective offshore centres in India and South Africa – all while complying with Financial Conduct Authority (FCA) regulations.
For additional peace of mind and increased efficiency, Firstsource’s shared services team handles all pre-processing and pre-underwriting tasks using Digilytics’ automation software, RevEL.
The benefits – cost savings and boosted CX
For those BTL lenders who are feeling the pinch amid testing market conditions, the benefits of the ‘Mortgage Shared Services’ solution will come as a welcome relief.
By reducing the cost per mortgage application to just £60-£75, lenders can lessen the impact of spiralling costs in a stroke.
What’s more, a 75% improvement in turnaround times and a flexibility to scale depending on fluctuating volumes will help significantly boost CX.
Indeed, it’s estimated that the Firstsource/Digilytics solution will contribute to a three to five point improvement in lenders’ net promoter score (NPS).
Don’t just survive, but thrive
The BTL market isn’t for the faint-hearted. Regulatory compliance, economic pressures, operational considerations, and CX demands, all present substantial challenges to lenders.
However, for those able to leverage strategic, AI-powered solutions such as ‘Mortgage Shared Services’, there are opportunities to navigate current conditions and lay the foundations for long-term growth.
