MMR slows offer process

The mortgage application process has significantly slowed in 2014, following the implementation of changes outlined in the Mortgage Market Review, the IRESS Mortgage Efficiency Survey has found.

The survey, which analysed the responses of lenders comprising 66% of gross lending in 2013, has found that just 9% of mortgage offers are produced within five days, compared to 13% last year.

This trend has accelerated as more stringent affordability and plausibility tests have been introduced. In 2012, one quarter of offers were produced within five days.

In total, less than half (44%) of mortgage offers are now produced within two weeks, much lower than the average of 56% a year ago. It now takes more than thirty days for customers to receive an offer in one in five cases.

The last year has also seen a shift in sales channels. The proportion of mortgages sales conducted via an intermediary has risen to 56.3%, reversing the direction of a trend which saw intermediary sales fall by nearly 14% to 53% in 2013.

Mutuals relied more heavily on intermediaries, with 63% of their mortgage business conducted in this way - although this was 5% lower than a year ago. Overall, banks conducted 52% of sales via intermediaries. One quarter of banks’ lending (26%) was conducted via branches, a 15% drop from 2013.

The intermediary channel proved most effective for buyers, with 70% of their applications going to offer, up from 62% a year ago. Across all channels, on average, nearly 40% of mortgage applications do not proceed to offer.

Following the implementation of MMR, nearly a third of lenders expect lending via intermediaries to increase. Twice as many forecast that execution-only sales will increase, while 80% now expect advised sales will rise.

Henry Woodcock, principal mortgage consultant, IRESS, said: “There’s no doubt that the MMR has taken its toll on the time taken to secure a mortgage.

"More comprehensive affordability testing and lengthier interviews have slowed the application process.

“Added to which, much of this remains a manual process among lenders as they adapt, exacerbating the problem.

“That said demand for mortgage finance has been so strong in the year so far that lending has continued at a rate of knots despite the disturbance.

“However, one thing is clear. Intermediaries have played an increasingly important role helping consumers navigate the murkier waters caused by regulatory change.

“We are likely to see lenders develop their execution-only offerings in the coming year, but that won’t diminish the part being played by brokers in securing the best outcomes for customers.”