Traditional mortgage application processes are creating barriers for consumers looking to buy a property, new research has revealed.
When you apply for a mortgage you need to provide proof of ID and address in the form of bank statements, utility bills and council tax statements.
Rising fraud means that the pressure for banks and lenders to prove someone’s identity has never been more critical and under new regulations, mortgage applicants are placed under more scrutiny than ever before to prove they are safe borrowers.
In order to satisfy money laundering requirements, these documents must be originals and not printed online copies.
According to intelligence specialists GBG, the majority of UK consumers (69%) today receive paperless bank statements, while 46% receive paperless credit card statements.
The research also found that 42% of UK consumers do not hold paper copies of their utilities bills for their current address, with a third (33%) signing up to paperless utility bill statements which they receive via email or access online.
However, the move towards a paperless society means that mortgage applications could be severely delayed as buyers wait to get paper copies from banks or utility companies.
Such delays in mortgage applications can consequently result in frustration, or even a property purchase falling through where the seller loses patience.
Worryingly, if an individual cannot obtain the original documents a lender could even turn the application down.
Nick Brown, group managing director at GBG, said: “As incidents of fraud continue to rise, the pressure for banks and lenders to prove someone’s identity has never been more critical. These paper-first procedures had to be put in place to sort the good from the bad.
“However, it’s clear these old-fashioned measures haven’t caught up with what’s actually happening in the real world. And as more customers opt to receive paperless statements and access their documents online, these traditional processes could hinder a legitimate individual’s chance of getting on the property ladder.”
The research also revealed that it takes just over three hours for the average UK homebuyer to source all the paper documentation required for their application. Add this to the time spent in various interviews with lenders and it paints a picture of a slow, time-consuming process. In fact, 27% of UK homeowners found applying for a mortgage long and drawn-out.
Commenting on her recent experience of purchasing her home in South East London, Juliette Keyte said: “I was shocked at how archaic the mortgage application process was. I have paperless billing with my bank and utility providers, so getting paper copies of bills to prove my identity and address was a massive hassle and took a lot of time. Buying a house was a hugely stressful experience, and having to prove who I was – umpteen times to various different parties – exacerbated that. I’m surprised the process hasn’t changed to meet the needs of the modern home buyer.”
Since the introduction of the Mortgage Market Review in April 2014, anyone taking out a mortgage is now subject to stricter lending criteria to check that they can afford to repay.
It has had a huge impact on the mortgage market, leading to a decline in mortgage lending.
Older borrowers have found themselves being turned down for loans, while others have become trapped on higher rates as mortgage prisoners.
Applicants have complained about the greater questioning on their income as well as the more thorough identity checks.
According to the National Association of Estate Agents, the average time it takes to secure a loan has risen from around 37 days to 53 days since its introduction.
Brown said: “In this digital age, processes should be becoming simpler rather than more complex. Today, we can verify the identity of over four billion people in the world in a matter of seconds, so why should people have to face weeks or months of form frustrations to try and get the service they require?
“As the world continues to digitise, banks and lenders need to bring onboarding processes into the 21st century and keep up with consumers’ expectations. The digital age creates the need to allow legitimate customers to on-board with ease and speed, whilst stopping fraudsters. Using identity data intelligently allows businesses to make better decisions quicker, and ultimately make processes slicker and more accurate.”
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