Independent review and analysis

Mortgage lending – managing workflow and margins

2019 has been an interesting year for mortgage lenders and despite generally pessimistic predictions at the end of 2018, most lenders we work with seem satisfied with their net book growth.  However, three factors have presented lenders with significant challenges this year; the management of flow rates, net interest margins and cost controls.

  • Flow rates: Analysis of UK Finance data shows that the number of loans for house purchase plummeted during the Winter of 2018, slowly rebuilt until October 2019 and has fallen back again since.  Re-mortgaging followed similar trends.  Managing underwriting and processing flows was further challenged by changing product segmentation.  As an example, buy to let plunged 11% in September 2019 compared to September 2018.  Consumers and intermediaries are demanding ever decreasing processing times and these demands are hitting at a time when lenders are seeking competitive advantage by widening credit appetites and moving into segments that need skilled manual case assessment.
  • Net interest margins: A speaker at a recent Credit Strategy conference, having analysed lenders’ interim accounts, stated that 13 out of the top 14 UK lenders have seen a reduction in net interest margin comparing H1 2019 with H1 2018.  Some of the reductions were eyewatering at over 50bp.
  • Cost controls: As lenders suffer further squeezed margins, most are focusing attention on cost controls, which based on the mantra ‘most costs walk into the office’ means that firms are looking closely at how to maximise and manage human resources.

The challenge with managing workflows within lenders is that trends are often dependant on external factors that are difficult to predict.  Taking 2019 as an example, just consider how consumer purchasing confidence has been put on hold by missed Brexit deadlines, ‘flip-flopping’ future bank base rate predictions and concerns about short term house price movements.

Rockstead has performed several short and long-term contracts helping lenders manage workflow peaks and costs in a more effective way.  Our staff have assisted with underwriting across numerous business segments, plus collections, compliance, customer service, training and QC.  Give us a call to see how we can help you manage your flows and costs. 

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