During these last days of the year, we often ask: What are the mortgage trends you predict for 2023?
Yes, our European clients anticipate a decrease in volume between 20% and 50%. The range mainly depends on, first, inflation -and subsequent raising interest rates- and second, on customer sentiment. Customer sentiment is largely dependent on how close a European country is to the current war in Ukraine.
We anticipate that players in the market will consider the glass half empty and will not leverage this crisis climate to innovate their mortgage offerings and processes. We feel the glass is half full. As Winston Churchill said, “never waste a good crisis”. Hence we’re optimistic about the following trends in 2023 in the mortgage market.
1. Remote mortgages acquisition trumps online mortgage acquisition
One of our European clients noted that in 2022 they processed 28% of their mortgage portfolio remotely. This was a 4x improvement from 2021, a year when we still had lockdowns. For them, remote meant a client being helped by a remote service center and serviced largely online but with the support from a remote client advisor through phone calls and virtual video conferring.
Various European customer studies have shown that since the Covid Lockdowns, +50% of borrowers are ready for virtual advisory. In 2023, we’ll see more mainstream banks shifting their service model to a remote set-up and removing the 10% pure self-service target for a 50% remote target. Countries, where paper is still dominant, will also see new regulations (cfr. Hungarian Digital Mortgage law) to facilitate these remote processes and make it easier for banks to advise and transact remotely.
We feel that the current inflationary environment, which is only loosely followed by increased interest rates, will put additional cost pressure on the banks—accelerating this transformation to remote as branch networks continue to be reduced.
2. Embedded Mortgages (as a Service)
Yes, Revolut announced they would move into mortgages with their SuperApp. But we estimate that the trend of embedded consumer lending will spill over to mortgage loans.
As conversion rates and, therefore acquisition costs for classic lead channels will get too high, lenders, brokers but also property providers themselves will look for seamless ways to finance the properties they have on offer. In 2022, we’ve seen several market-dominating real estate platforms such as Willhaben (Austria) and Immowelt (Germany) launching or partnering with a broker. Yet, financial apps and pension planners will also become targets for such platforms.
In 2023, we predict more of these initiatives, deeper integrated processes and a market place like feeling. Marketplaces that will enable bank lenders but also non-bank lenders to easily connect their products to the massive distribution markets.
3. Bigger brokers
In the past 10 years, mortgage brokerage has established firm roots in the European mortgage ecosystem. Operating in markets where banks are reducing their physical footprint and regulatory environments where multiple products need to be advised, they have outgrown the mortgage markets year-on-year.
Mortgage advice, however, remains costly manner as it’s very human driven. In European markets which in 2023 will be scarce on loan advisory talent and with increasing cost pressures through reduced volumes, we’ll see a stark consolidation. This will further create markets where 80 to 90% of the mortgage broker volumes will be executed by 5 to 10 broker pools and groups. Leading to the further professionalisation of the job. Furthermore, this will also lead to cross-border activities of some of these behemoths.