New research from GoCardless, the bank payment company, reveals that mortgage lenders have a long way to go to keep their customers happy. 41% of British consumers believe lenders are relying on “outdated” methods to assess mortgage affordability, rising to 48% of those who have purchased a property within the last 12 months. 

First-time buyers and the self-employed are most disillusioned

The research points to widespread discontent about the mortgage application process, with consumers who are currently on -- or just about to start -- the journey amongst the most negative. 

• Over half (53%) of those who plan to purchase their first home in the next 12 months describe the mortgage application process as “extremely stressful”, in contrast to 40% of the general population. 

• Amongst this group, the proportion who call it “unfair” is double the national average -- at 24% versus 12%.

• Six in ten (61%) of these first-time buyers also say the mortgage application process is “confusing”, compared to four in ten (43%) for all consumers.

One in six (18%) consumers believe they have been “unfairly penalised” by mortgage lenders, jumping to nearly a third (31%) of those who are self-employed. 

It’s not just the mortgage application process that is taking a toll. The study indicates that over a third (37%) of respondents find saving for a mortgage in the UK a “difficult” process. When asked why, 65% say it’s because their income has stayed the same while the cost of everyday goods, such as petrol and groceries, has increased. 

In addition, 46% of people who find the process difficult believe the experience has had a negative impact on their mental well-being. Interestingly, the proportion is higher (51%) for those who own a property with a mortgage, suggesting that even those who were successful can’t shake the bad memories.

Open banking as a potential solution

Consumers have given lenders plenty to think about when it comes to improving their home-buying experience. Two in five (42%) believe lenders should embrace technologies like open banking to consider more data points – such as everyday spending, bill repayments or rent payments – when assessing their mortgage application. Younger respondents are significantly more enthusiastic, with 52% of those aged 18-34 agreeing, compared to just 29% of consumers aged 55+.

The study also found that a quarter (26%) of consumers would be open to sharing their bank account data via open banking so that lenders can see all of their incomings and outgoings, instead of just relying on the items shared in traditional credit checks.

One in six (18%) believe that open banking would help to reduce their levels of stress and anxiety in the mortgage application process. The figure rises to one in four (26%) for people in the 18-34 age bracket.

Pat Phelan, Managing Director of UK&I and Chief Customer Officer at GoCardless, said: “Consumers have issued a clarion call to lenders everywhere: when it comes to the mortgage application process, we’re due for a change. The system that many lenders use today has not changed for years. But the way in which we earn, save and spend, from side hustles to the subscription economy, is completely different. 

That mismatch is driving a lot of frustration, particularly amongst young people and the self-employed. Our research suggests that both groups feel like they’ve been unfairly penalised and subject to a lot of unnecessary stress by an outdated process. Open banking is a potential solution, not just for these groups, but for all aspiring homebuyers. Lenders that want to grow their market share amongst Generation Rent have a huge opportunity to stand out by embracing open banking to make the journey easier, faster and more fair.”