In the same week that YOPA raised more money from Daily Mail General Trust and LSL, Habito also raised a substantial amount of money – £18.5m – to connect consumers digitally to mortgage lenders.
Habito helps home buyers find a loan by asking a series of questions and then scanning the market for appropriate lenders and products. The questions are based on thousands of real-life interviews conducted by brokers, and save borrowers having to fill in lengthy application forms.
Importantly, it charges no fees to the borrower, making its money from the procuration fees ordinarily paid by lenders to brokers.
As such, the start-up, led by Daniel Hegarty, is a challenge to the revenues of traditional brokers and estate agents.
But Habito isn’t the first with this innovation. Blend in the US – which had previously raised $60m and processed $30bn of mortgage applications in 2017 so far – has raised another $100m.
The company helps lenders move their application process online to increase the number of successful applications from borrowers.
Beyond electronic applications, Blend’s mobile app puts consumers in direct contact with their ‘loan officer’ at the lender – allowing for quicker resolution to simple requests for information.
Blend is amongst a raft of lending start-ups in the US to receive massive amounts of funding; the list includes Clara Lending ($27m raised), LendingHome ($109m) and SoFi ($1.88bn).
It is important to note that, unlike many of the new mortgage lending and booking start-ups, Blend sells its services to the lenders rather than operating as a consumer brand.
The most novel direct-to-consumer new participant in the market has to be the US’s Opendoor, which offers a 1% discount when you use its in-house mortgage process to buy one of their refurbished homes.
Its reasoning is simple: going through a traditional mortgage process takes 30-60 days to close a transaction. With Opendoor Mortgage a buyer can close a purchase in as little as 15 days.
As Opendoor buys homes on to its own balance sheet, being able to shift them sooner and with more certainty makes a big difference to its margins.
It’s because of this balance sheet risk that the UK’s Nested – which took inspiration from Opendoor – decided to lend consumers the money for their home sale, so they can continue up the chain without worrying about their own sale.
Many of these digital mortgage booking solutions take the revenue that agents in the UK would have traditionally had as a potential upsell.
But it’s not estate agents who should be worried, as their job is still based on being present at physical property – and therefore there will always be opportunities to upsell to the person in front of them.
With the amount of information we now give up about ourselves, surely it’s only a matter of time before mortgage lending decisions are taken by machines rather than people.
It seems likely an app like the one developed by Blend in the hands of agents could allow them to confidently represent to their vendor how much a buyer can genuinely borrow.