Home buyers facing ‘computer says no’ syndrome

Published: 21/11/2013

High streets lenders have been criticised for their impersonal underwriting process which could leave many potential buyers see their mortgage application unfairly rejected.

Chief Executive of the Dudley Building Society, Jeremy Wood, believes the computer generated scoring models used by high street lenders could raise red flags against certain types of wannabe borrowers unnecessarily:

“The overhasty withdrawal interest only, the restriction on old borrowers and the tick box mentality being seen on cases that do not meet every part of the lender’s matrix are symptomatic of a part of the industry which has lost its nerve. In trying to eliminate risk by homogenising the underwriting process, current lending policy in general has left swathes of potential borrowers out in the cold. We are not talking about bad credit risks, we are talking about good quality cases, on which a good underwriter can make logical and positive value judgements.”

Latest figures have shown a 50 per cent increase in gross mortgage lending by mutuals; in September building societies and other mutuals advanced £3.7bn, £1.2bn more than the same period last year. Nationwide is now lending £13.2m every working hour. As a result mutuals’ gross lending market share now stands just shy of a quarter.

Jeremy Wood feels this is largely down to the sector’s use of human underwriters and holistic case assessment:

“The mutual sector has been able to offer some much needed sense of balance over the past two years, because we are looking to find reasons to lend safely, rather than the reverse. At the Dudley, our analysis, based on conversations with brokers and our distributors, tells us that the wider intermediary sector is getting tired of having to submit cases to high street lenders because of the keen pricing on offer, only to find that, as they suspected, the lender in question was only ever interested in cherry picking the low hanging fruit. This is one of the major reasons we have an unbalanced lending market.”

And this attitude is beginning to be shared amongst borrowers too; a recent survey revealed 31 per cent more customers trust mutuals than banks.

Content correct at time of publication