"As incidents of fraud continue to rise, the pressure for banks and lenders to prove someone’s identity has never been more critical"
Under new lending rules, known as the Mortgage Market Review, set out by the Financial Conduct Authority (FCA) in 2014, individuals applying for a mortgage must provide proof of ID and address in the form of bank statements, utility bills and/or council tax statements. To satisfy money laundering requirements, these documents must be originals and not printed online copies.
Yet, GBG research can reveal that the majority of UK consumers (69%) today receive paperless bank statements while 46% receive paperless credit card statements. The younger generation are most likely to opt in for paperless bank statements, with 75% of 18-24 year olds saying they receive digital versions of their bank statements, compared to 59% of those aged over 55 years old.
The research also found that 42% of UK consumers do not hold paper copies of their utilities bills for their current address, with a third (33%) signing up to paperless utility bill statements which they receive via email or access online. If an individual does not have suitable documentation to prove their identity, an application can be significantly delayed as they wait for paper copies from their bank or utility company. Such delays in mortgage applications can consequently result in frustration, or even a property purchase falling through where the seller loses patience. What’s more, if an individual cannot obtain the original documents, a lender may well turn the application down.
Nick Brown, group managing director at GBG said, “As incidents of fraud continue to rise, the pressure for banks and lenders to prove someone’s identity has never been more critical. These paper-first procedures had to be put in place to sort the ‘good’ from the ‘bad’. However, it’s clear these old-fashioned measures haven’t caught up with what’s actually happening in the real world. And as more customers opt to receive paperless statements and access their documents online, these traditional processes could hinder a legitimate individual’s chance of getting on the property ladder.”
Movers and shakers
Under the new regulations outlined by the FCA, mortgage applicants are, today, placed under more scrutiny than ever before to prove they are safe borrowers. Major lifestyle changes, such as moving home on a regular basis, are pulled into question and lenders will often ask applicants for proof of address for previous properties if they have moved frequently.
However, GBG’s research can reveal that 45% of UK consumers have moved address 1-2 times in the last three years and over a third (34%) do not hold proof of address documents – such as utility bills or council tax statements – for each of their previous addresses.
Those aged between 18 and 24 were most likely to move frequently – as a result of moving from their family home, to student accommodation, to their first home as a graduate. Nearly one in five (18%) has moved 3-4 times in the last three years and 70% moved at least once. Yet 39% do not hold proof of address documents for each of their previous addresses. Failing to provide this documentation could, again, result in an application being turned down by a lender.
Housing headaches
When GBG asked UK homeowners about their mortgage application experience, over a third (36%) said they found it stressful and 33% said it was a complicated process. The research also revealed that it took the average UK homeowner just over three hours to source all the paper documentation (utility bills, council tax statements, verified copies of ID documents) required for their application. Add this to the time spent in various interviews with lenders and it paints a picture of a slow, time-consuming process. In fact, 27% of UK homeowners found applying for a mortgage ‘long and drawn-out’.
Commenting on her recent experience of purchasing her home in South East London, Juliette Keyte said, “I was shocked at how archaic the mortgage application process was. I have paperless billing with my bank and utility providers, so getting paper copies of bills to prove my identity and address was a massive hassle and took a lot of time. Buying a house was a hugely stressful experience, and having to prove who I was – umpteen times to various different parties – exacerbated that. I’m surprised the process hasn’t changed to meet the needs of the modern home buyer.”
A simpler solution
These long, complicated processes are impacting the number of successful mortgage applications. Just last month, it was reported that mortgage approvals by banks had fallen to the lowest figure since November 2016. Furthermore, the average time taken to secure a loan has risen from around 37 days to 53 days as applicants undergo greater questioning on their income, affordability as well as thorough identity checks.
Nick Brown concluded: “In this digital age, processes should be becoming simpler rather than more complex. Today, we can verify the identity of over four billion people in the world in a matter of seconds, so why should people have to face weeks or months of form frustrations to try and get the service they require?
As the world continues to digitise, banks and lenders need to bring onboarding processes into the 21st century and keep up with consumers’ expectations. The digital age creates the need to allow legitimate customers to on-board with ease and speed, whilst stopping fraudsters. Using identity data intelligently allows businesses to make better decisions quicker, and ultimately make processes slicker and more accurate.”
