Nov

MORTGAGES: Technology brings transparency to the buy-to-let market

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It is estimated that only one in three millennials in the UK will ever own a home. Whilst property prices have soared by an average of 152 per cent, the average household income has only risen by 22 per cent.

The buy-to-let property market presents significant opportunities for landlords and investors to grow their investment portfolios. The average rent on newly let property outside London has risen by 6.8% in the last year.

But the buy-to-let market has been accused of being slow and lacking transparency. Brokers have criticised the technology strategy of traditional lenders like high street banks for having a lack of transparency.

The emergence of disruptive technologies in the buy-to-let market promises to improve the transparency and efficiency of lenders, borrowers and brokers. But it’s small, independent innovators that are leading the way.

Brokers criticise big finance

Financial investment is notorious for its lack of transparency. A study published by the Financial Conduct Authority (FCA) revealed the lack of clarity prevented 30 per cent of consumers from being eligible for favourable mortgages.

Brokers often lament the ‘friction‘ that is inherent in the mortgage application process and do not feel large lenders are tackling the issues efficiently. Smaller lenders are also hampered by the increased amount of paperwork involved. There is little coherence between borrowers and lenders.

Technology has the potential to make the UK property market more transparent than it’s ever been.

Intermediary tools developed by independent third parties provide solutions that make reliable information readily available. More transparency will also mean that consumers will be able to find buy-to-let mortgages that fit their financial capacity.

Improved data glow

Digital technology is better at recording data and keeping a history of transactions. With a broader scope to access financial histories, lenders are able to assess a borrower’s suitability for a loan quickly.

Systems on both sides of the fence exchange accurate data. Lenders should be obligated to provide transparency with regard to hidden fees. When brokers are involved, it is often the case that cost margins are passed on to the borrower.

Innovations in the buy-to-let market accurately evaluate buy-to-let mortgages to ensure borrowers can meet lending criteria and lenders can provide mortgages that meet the borrower’s circumstances.

Third-party technology

While large lenders are failing to deliver efficient solutions in the buy-to-let market, third party innovations provide platforms that do.

For example, Pitch 4 Finance, has designed a platform that puts borrowers directly in touch with lenders that meet their criteria.

The platform provides instant criteria matching, real-time application updates, tracking and greater exposure for users. Borrowers have access to all lenders in the market which enables them to find deals that are more suited to their needs.

Independent third-party platforms also benefit small lenders and allow them to compete with traditional high street banks. And with consumers demanding more transparency, they may turn to small lenders in search for the most cost-effective deals.

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