Why the home loan market will never be the same again
The future of mortgages is online, PTSB director Niall O'Grady tells our editor
Within three to five years, the entire Irish mortgage process will be carried out remotely and online with 'face-to-face' dealings between borrower and lender conducted solely on screen, says a director of one of Ireland's big lenders.
Borrowers will find products, assess what they can borrow, apply for the loan, gain approval, exchange documentation and be paid their loans - entirely online.
Niall O'Grady, director of customer products for Permanent TSB, says borrowers will "take ownership" of the whole mortgage process online from start to finish.
"Many parts of the process are already conducted online and the technology is already there to make the rest possible. It will, however, take a few years before it actually rolls out," says Mr O'Grady.
"It's obvious that the battleground for mortgage providers and for mortgage brokers is increasingly online. Therefore, to succeed going forward, we will have to improve our online presence and make sure we are there in all the online places where mortgages are being discussed."
Those mortgage customers who want to talk to someone will connect up via Skype-type audio and visual links. Mr O'Grady says that PTSB is already looking at options to train up large numbers of staff for online audio and visual interaction.
Permanent TSB is similarly investing heavily in its search engine optimisation (SEO) teams.
Mr O'Grady will be outlining the future of the mortgage market, as he sees it, in his role as a keynote speaker at the forthcoming Irish Independent's third annual Residential Property Conference which takes place at the RDS on March 2.
The free-to-register event is expected to host almost 1,000 property professionals and interested parties from all over Ireland when it kicks off on Wednesday.
Unprecedented changes have taken place in the mortgage sector in recent years, with lending organisations like PTSB facing a 'triple whammy' of having to restructure and recover from the fallout of the crash as well as coping with rapid advances in technologies and changes in how lenders must conduct their business going forward.
Added to this has been the requirement to overhaul systems to cope with last year's significant interventions by the Central Bank for deposits and loan-to-income ratios.
"There is obviously a smaller number of lenders - before the crash, you had up to 13 mortgage providers operating in Ireland. Now, realistically, you have five," says Mr O'Grady. "The mortgage market will never be the same size again, partly because more people are becoming comfortable with renting and staying in rental accommodation for longer and first-time buyers are coming to the market later in their lives.
"You could say that for the first time, we Irish aren't as obsessed with home ownership and are exercising the choice of not entering home ownership until later or at all. And so the customers themselves have changed."
And while he doesn't mention it, it could also be assumed that a good deal of this increase in renting is not out of choice, with many potential home buyers in city areas ejected temporarily or permanently from the purchase market by last year's Central Bank restrictions seeking higher deposits and more rigorous loan-to-value ratios. Either way, it further reduces the pool of borrowers.
"As I've mentioned, with online, customers have become more empowered and are more likely to go searching themselves for the right product rather than allow a broker to do it for them. It means power has shifted away from brokers."
Meantime, the loan products on offer have also changed beyond recognition and O'Grady says they will evolve even more rapidly as time goes on. For example, PTSB's new 'Three in One' mortgage is typical of the new flexibility lenders must now apply in order to secure a share in a reduced market. Borrowers can "tweak" their terms as they go along, with options to overpay in more flush times, to underpay in tighter times and to change the numbers of payments through the year to suit their needs.
PTSB recently started inviting standard variable rate customers to take up lower managed variable rates, but it also set the cat amongst the pigeons with an aggressive outright giveaway offer through its recently announced 2pc "cash back" for customers.
It means a customer applying for a €300,000 loan, get €6,000 cash to spend on whatever they like.
Changes have been made to allow tracker customers to move house and nd hold on to their benefits.
Having been the largest mortgage lender during the boom years, PTSB also has more than its fair share of customers in negative equity - again requiring flexibility.
So initiatives have been taken to allow borrowers in these circumstances to move so long as their other credentials are in compliance.
Meantime, a new 'disconnect' which occurs with the increasing drift to online needs to be recouped.
So Permanent TSB has taken to phoning its customers on a regular basis to ask them how they view the lender's services and to allow borrowers to suggest new ideas for further changes.
"The Irish mortgage market will quite simply never be the same again," says O'Grady.