Mortgage lenders have a long way to go to keep their customers happy according to bank payment company GoCardless.

It reveals research highlighting that 41% of UK consumers believe lenders are relying on “outdated” methods to assess mortgage affordability.

This rises 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. 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”. This is 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”. This compares to four in ten (43%) for all consumers.

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By GlobalData

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

It’s not just the mortgage application process that is taking a toll. Over a third (37%) of respondents say that saving for a mortgage in the UK a “difficult” process. Some 65% say it’s because their income has stayed the same while the cost of everyday goods has increased.

In addition, 46% who find the process difficult believe the experience has had a negative impact on their mental well-being. The proportion is higher (51%) for those who own a property with a mortgage. GoCardless says that this suggests 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. Examples include everyday spending, bill repayments or rent payments, when assessing their mortgage application. Younger respondents are more enthusiastic, with 52% of those aged 18-34 agreeing, compared to just 29% of consumers aged 55+.

The study notes that 26% of consumers would share their bank account data via open banking. This means that lenders can see all incomings and outgoings, instead of relying on information 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.

Mortgage application process: ‘We’re due for a change’

Pat Phelan, MD, 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. 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. They can stand out by embracing open banking to make the journey easier, faster and fairer.”

The full report is available via this link