Hi-lights from IRESS Mortgage Efficiency Survey 2016. This industry survey, now in its fifth year, tracks the developments in the mortgage industry over the past 12 months. It enables lenders to benchmark their mortgage sales and originations systems and processes against the mortgage market as a whole, their peers and the sector they operate in across a variety of key performance indicators. For the full report view www.iress.com/mes2016

1. Mortgage Efficiency Survey
2016
iress.com
Henry Woodcock - Principal Mortgage Consultant
October 2016

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1. Introduction
2. Key insights
3. Challenges and opportunities
4. Conclusion
Contents

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5th Year £bn Gross Lending
1 Introduction
The following 18 lenders have supported in 2016:
68%
Survey of participants
Rest of market
market share
£150
£70
• Aldermore
• BM Solutions
• Cambridge Building
Society
• Clydesdale Bank
• Co-operative Banking
Group
• Coventry Building
Society
• Halifax
• Hinckley & Rugby
Building Society
• Leeds Building Society
• Nationwide Building
Society Group
• Nottingham Building
Society
• One Savings Bank
• Royal Bank of Scotland
• Santander
• Scottish Widows Bank
• Tesco Bank
• West Bromwich Building
Society
• YBS Group

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The rise and rise of Buy to Let
2 Key insights
0%
5%
10%
15%
20%
25%
30%
35%
2012 2014 2016
Buy to Let
31.8%
14.6%
Among the survey participants, Buy to Let
saw an increase of 49% compared to last
year and an increase of more than 213%
over the last five years of the survey.
Over £31bn
BUY TO LET
49
%
COMPARED TO 2015
INCREASE OF 213% OVER
THE LAST 5 YEARS

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What have been the key drivers?
2 Key insights
• the lack of social housing continues to increase the
demand for private rental properties
• rising house prices and rents make BTL a compelling
investment particularly whilst interest rates remain so low
• with BTL in the main being outside of the MMR
regulation, cases are relatively easier to process for
lenders and according to recent mortgage default
statistics, a less risky investment
%
BUY TO LET
49COMPARED TO 2015
Will the rise in Buy to Let continue?

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The intermediary channel continues
to be channel of choice
2 Key insights
0
10
20
30
40
50
60
70
80
90
2012 2013 2014 2015 2016
Intermediary Distribution%
Banks Mutuals
Mutuals v Banks gap narrowed
• Intermediaries had an average of 81.7%
market share rising to 90% within Tier 3
lenders
• 70% of lenders experienced an increase in
the number of applications submitted by
brokers and 47% of lenders expect the
number of brokers to increase next year

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Challenges in direct distribution
2 Key insights
• Direct lending in branch and by telephony
has dropped across the last three years by
just over half (51.4%) in branches and by
over a third (35.3%) in telephony
• Over the last three years of the survey,
sales functionality such as DIP, Quotation
and Offer at POS has dropped by 30% in
the branch channel and 20% in the
telephony channel
Efficiency impacted by MMR
• The impact of the MMR is still apparent
with the number of offers in 2016 being
produced in 10 days or less 37% lower
than in 2012

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DIP accepts, refers and declines
2 Key insights
• Over the last three years, the number of
accepts have declined in all sales
channels. Accepts in the branch dropped
by 20%, by 18.4% in the consumer, 14.6%
in telephony and 9% in the intermediary
channel
• A significant rise in referrals in the direct
channels, by an average of 56%
Digital technology offerings increase
• Mobile quote and decision in principle have
increased over the last year by 185%, case
tracking increased by 72% and full
mortgage application has increased by
116%
• Over 44% of lenders planning to offer more
mobile services next year

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The intermediary market
3 Challenges and Opportunities
• Has market share peaked?
• Competition will be fierce
• There are still a number of disconnects in the intermediary mortgage market as highlighted
by the IRESS Intermediary Mortgage Survey 2016
• 53% of intermediaries ranked lenders systems as average to very poor for ease of use

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Intermediary demands
3 Challenges and Opportunities
• More intuitive systems, easier to navigate, with intelligent questioning - ask once and answer once
Intermediaries are looking for:
• Up-to-date information and real-time case tracking
• Making it easier to obtain a decision in principle by capturing the minimal amount of relevant
information required

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Declining direct sales
3 Challenges and Opportunities
• Direct lending has dropped over the last three years - the MMR effect
• Direct point of sale functionality appears to lacking, a third of lenders not providing quotations
and decision in principle
• Only 1 in 10 lenders use AVMs and just over half instruct valuations digitally

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Increasing direct sales
3 Challenges and Opportunities
• MCOB + MMR + MCD = ?
• Smarter technology to aid decisioning - a third of sales are currently referred
• Scan and attach at point of sale and by the consumer
• Investment in direct to consumer, execution only sales

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3 Challenges and Opportunities
Days to offer
• Over 50% of offers take more than 14 days to be produced
• Compared to 2012, 37% fewer offers are produced in less than 10 days
• After an initial dip in 2014 following the introduction of MMR, the percentage of cases
going to offer across all time periods has steadily increased but on average is still 30%
below the pre-MMR figures.

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Reducing the number of days to offer
3 Challenges and Opportunities
• In depth review of current processes, technology and culture
• An early yes or no, to reduce referrals and underwriter workloads
• Employ workflow technology do some of the heavy lifting so that underwriters underwrite
• Remove paper and postal delays through scanning at POS and centrally
• Enable process transparency by providing automated alerts to manage exceptions or
outstanding requirements and so reduce the hours spent answering calls from applicants and
brokers alike

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4 Conclusion
• As more lenders come into the mortgage market, many relying on intermediary distribution,
competition for customers and distribution will continue to increase
• Some lenders have the ‘stack them high and sell cheap’ automation proposition, others
look to differentiate with “human” not “robo” underwriting

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4 Conclusion
The winners will be those lenders that
can balance the two ends of the selling spectrum. Using
automation and workflow to drive efficiencies and lower
days to offer, with personalisation for those cases and
consumers where that will provide the optimal desired
level of service

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Thank you
1 Kingmaker Court,
Warwick Technology Park,
Gallows Hill,
Warwick, CV34 6DY
M: 07778 178 220
henry.woodcock@iress.co.uk
Henry Woodcock
Linkedin.com/henrywoodock
@henry_woodcock