What's this all about?
At LEVERIS, we believe that the future of banking starts at the core. Core by LEVERIS is an interview series where we address the issues at the core of banking, fintech and financial services. We speak to those working at the intersection between tech and finance about everything from the future of money to investment in fintechs. Through their insights, we explore current trends, predict future outcomes and get a taste of what it takes to succeed in the new age of banking.
Our latest guest in the series heads up a digital mortgage platform that is shaking up the Irish market. Taking a fresh approach to mortgages, helping new buyers and homeowners save on interest rates and reduce monthly repayments, and tracking mortgage trends with its quarterly mortgage switching index, doddl is a welcome addition to an industry that still has quite a bit of catching up to do when it comes to digital processes.
As Managing Director of doddl, Martina Hennessy steers a team of professionally qualified mortgage experts acting as intermediaries between borrowers and lenders. In the following interview, Martina discusses how the lockdown has enabled people to take a fresh look at their finances, the importance of the human element of the mortgage process, whether we’re likely to see a ‘Revolut for mortgages’ anytime soon, and her industry predictions for 2021.
LEVERIS: Could you give us some background on doddl on how it's shaking up the mortgage market? How do you differ from traditional mortgage brokers?
Martina Hennessy: doddl is an entirely free digital mortgage platform providing access to eight major lenders in the Irish mortgage market. Our platform is supported by our team of qualified mortgage experts, allowing us to manage the whole mortgage process from enquiry to completion completely online.
We put our customers at the heart of the process by taking all the hassle and stress out of the process while also finding them the best rates. In short, we make mortgages a doddl and save our customers a fortune while we’re at it.
LEVERIS: How has the global pandemic shaped your business?
Martina Hennessy: From the very outset, we believed that consumers wanted to process mortgage applications online as long as there was an intuitive digital solution to enable them. The pandemic has only solidified this belief, as we have seen our business increase to the point where mortgage applications are as high as they were in the boom times.
On the switching side, we are seeing a huge change in attitudes and behaviours. While the pandemic was already accelerating the adoption of digital services it also meant that people were at home and had more time to think about and review their mortgage. This has resulted in more people switching mortgage provider in the hunt for better rates and ultimately monthly savings.
LEVERIS: What are the main trends you are currently witnessing in the mortgage market?
Martina Hennessy: The last quarter of 2020 saw a surge in the number of mortgage approvals with October recording the highest monthly rate for over a decade. This was largely been driven by first-time buyers who made up almost 60 per cent of both the total volume and value of approvals.
An increase in market activity looks set to continue into 2021, driven by a decline in COVID-19 economic uncertainty, lower available interest rates and, ultimately, people’s desire to secure a home that may now also double as a workplace.
Low supply and an appetite for suitable housing with home office potential has fuelled intensive market activity which is set to continue into the new year, with estate agents forecasting a 5 per cent annual rise for 2021.
We have also recently seen the introduction of the first new bank to commence mortgage lending in Ireland for over 12 years – and this move has heralded a changing mortgage landscape that will shape the market in 2021.
There is also a marked increase in the numbers using mortgage brokers to secure their mortgage as opposed to going direct to lenders. Over 31 per cent of applicants are now using a broker to secure their mortgage – an annual rise of 4 per cent. I expect to see broker market share continuing to increase as more consumers recognise the benefit of market-based advice in an arena which is becoming more competitive based on rates.
The introduction of Avant Money as a broker-only offering means that there are four mortgage lenders in Ireland who rely solely on the broker market as their core distribution channel. People are increasingly bypassing banks and realising that if they don’t use a broker to secure a mortgage, they are missing out on 40 per cent of the market, including the lowest available rate.
LEVERIS: What were the key findings from your most recent mortgage switching index?
Martina Hennessy: Irish homeowners are needlessly paying up to €135 per month on every €100,000 owed on a 25-year mortgage. Taking a €300,000 mortgage, this means €405 in extra mortgage repayments per month or €4,860 a year by not switching lenders.
The gap between the highest and lowest interest rates is the largest in over 12 years with the lowest rate on the market now 1.95 per cent. In its latest report on mortgage switching, the Central Bank highlighted that of those eligible to switch, 60 per cent could save over €10,000.
We have seen a large increase in mortgage holders whose loan to value is 60 per cent or less and who were not previously active in the switching market. This cohort of mortgage holder has been awoken by the headline rate drop below 2 per cent.
LEVERIS: How are banks currently addressing requests for mortgage payment breaks? Are the numbers on the rise?
Martina Hennessy: COVID-19 mortgage payment breaks were introduced on March 18th 2020 with the aim of giving mortgage holders options during times of financial stress. Over 65,000 mortgage breaks were granted from introduction to end April 2020. Originally intended for three months the breaks were extended to six months.
The COVID-19 mortgage payment break has now ceased and mortgage holders who required forbearance measures past this date would be assessed under the Mortgage Arrears Resolution Process.
LEVERIS: In a similar way to how wealth management is becoming more democratised through clever and intuitive apps, would you say more people have an appetite and an ability to better control their personal finances and mortgages?
Martina Hennessy: People are certainly becoming more astute when it comes to their personal finances, with lockdown time allowing for a fresh look at priorities and finances.
Historically, people would have automatically taken their mortgage with their current bank, continuing to pay their mortgage each month. The annual mortgage statement would arrive each January and be put away and not reviewed. However, with our doddl Mortgage Switching Index highlighting the huge savings available at a national level, what we are seeing with our clients is a change in mindset, especially with our first-time buyers. They will take out their mortgage with a lender that meets their requirements at the time, but will openly discuss the fact that they will switch again in 2-3 years if there is a better rate available to them.
LEVERIS: Your main tagline is ‘Mortgages without all the time & hassle’. How important is it that we see more companies help consumers become homeowners more easily, quickly, and with a more personalised experience? What kind of changes do you see coming down the track?
Martina Hennessy: Mortgages can be daunting with so many options to choose from and, traditionally, with so much paperwork. That is where we come in. We have access to all eight of the major Irish lenders, we know their current products and understand all their various underwriting policies. We take on the heavy lifting part of the process, advising our customers at every step of the way to ensure they secure the mortgage that’s best for them.
The mortgage market is growing at a significant rate and the requirement for new homes is always increasing. There is a lot more that can be done to improve the process which unlike other financial processes has changed very little in the past 20 years. Estate agents, banks, solicitors etc. all need to improve their digital offerings to enable a more efficient mortgage process.
Changes we see coming down the track are already in place in many other countries. Open banking and its eventual evolution to open finance, more integrated and contextual financial services, online valuations and the digitisation of the conveyancing process would hugely improve the consumer experience and put money back into the real economy.
LEVERIS: Are we likely to see a ‘Revolut for mortgages’ in the near future whereby people can simply apply for a mortgage with the click of a few buttons through their banking app?
Martina Hennessy: This is unlikely in the very near future due to the various regulatory requirements. Given the fact that your mortgage is generally your biggest financial commitment, the human advice piece of the process is key and in some jurisdictions a compliance requirement.
There is, however, a significant amount of the process that could and will be improved through the proper application of technology.
LEVERIS: Aside from your own, any interesting finance companies or fintechs out there disrupting their industries?
Martina Hennessy: I don’t think there is a single corner of the financial services world that is not already being transformed by new intelligent digital services and innovative fintechs. We admire and take great heart from the success of companies that are similar to doddl such as Habito and Trussle. They are proving that digital mortgages are here to stay and that switching your mortgage, as a means to save money, is becoming a key part of our everyday financial planning. This is not only great for doddl but also great for anyone who wants to own their own home.
LEVERIS: What are your main finance/mortgage trend predictions for 2021?
Martina Hennessy: Exceptions were effectively paused early last year, so it is expected that the opening three months of 2021 will see higher mortgage approval levels with the introduction of exceptions to Central Bank rules opening again in January. Meanwhile, Central Bank macroprudential lending rules will remain unchanged into 2021.
The market is becoming increasingly dominated by fixed rates, which now make up three-quarters of all new agreements. They are currently lower than variable rates and are attractive due to the security they offer over repayments for a fixed period. While longer-term fixed rates of 7- and 10-years are available, the 2-, 3- and 5-year fixed rates tend to be most popular. They are expected to stay lower for longer so I would expect that the majority of new mortgages will continue to be drawn down on fixed rates.
However, the arrival of Avant Money could change the way that the Irish mortgage market is structured. Where lenders on market currently offer fixed rates tiered by loan to value of less than 60 per cent, 60 to 80 per cent, or over 80 per cent, Avant Money discounts at every 10 per cent loan to value interval.
This year will see further divergence to a two-tiered structure as market rate reductions continue in fixed rates, but where lenders offer 2 per cent cashback at drawdown rates remain high. These lenders have already extended their offers, which are generally higher than non-cashback, to the end of December 2021. Their rates continue to be higher as these lenders compete for market share based on short-term cash incentives instead of rate.
Banks will continue to focus on the sustainability of income and industry risk when assessing mortgage applications as the fallout from the pandemic continues into 2021.
Demand for mortgages is hugely strong with a surge in applications at the end of 2020. The main issue will remain to be the supply of property. We are seeing more and more applicants looking to purchase outside of city locations with opportunities for long-term remote working being granted.