MortgageGym.com is using open banking technology to provide the service which will enable applicants to side-step the paper-based background checks.
The new technology will use open baking, credit file searches and banks’ internal lending criteria to provide insights into each applicants’ spending.
When using paper-based applications there is no way of assessing whether the average applicant can afford the mortgages they are applying for.
However, the new tool will look at each applicant’s spending patterns over the last 12 months – a much longer period than the three months’ currently analysed through paper-based checks.
It will then match this to the applicant’s Experian credit file and compare it to the scorecards of 65% of the top 20 mortgage lenders in the UK.
15 minute application
MortgageGym said UK homebuyers could complete their application online in 15 minutes through its free online portal.
They would also avoid having to answer ‘embarrassing’ questions about their income and expenditure as the app would intelligently differentiate between salaries and other income and designate spending into five different categories.
*regular income (such as salary),
*irregular income (freelancing or investment returns),
*necessary committed expenditure (loans, bills, rent etc),
*non-necessary expenditure (mobile phone and TV contracts) and
*lifestyle expenditure
MortgageGym said because of the insights offered, applicants would only receive mortgage deals they could 100% afford.
Mortgage market overhaul
The launch comes after the Financial Conduct Authority (FCA) called on the mortgage industry to make it easier for borrowers to shop around and find suitable mortgages.
John Ingram, co-founder of MortgageGym, said it was essentially pioneering the use of open banking data in the mortgage sector in a highly practical way, which was set to revolutionise the mortgage sector.
He added: “Who wants to explain to their mortgage broker why they spent a lot on the High Street in one particular month, followed by eating out more than average the next?
“Our categorisation engine will be able to tell that an engagement ring is a non-recurring discretionary expenditure and, even though the ensuing celebrations may have been prolonged, they were not on-going throughout the year.
“As we all need to be assessed when applying for a mortgage, as it’s a regulatory requirement, who wouldn’t want to forgo the annoying explanations and antiquated form-filling? There will soon be a faster, painless and more accurate way of getting the best possible mortgage deal for you.”
I can’t see this working in practice unless there is a complete overhaul of how ALL lenders assess new incoming mortgage applications. Currently lenders want to see both payslips and bank statements showing the wages being paid in each week or month. This, among other things, is to prevent mortgage fraud and the ‘self certification’ of income was one of the biggest contributing factors to the banking downfall of 2008/9.
This article sounds good in theory, putting it into practice is another matter entirely