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Open Banking allows companies to access individuals’ bank and building data, providing the customer has given permission. Nine big UK lenders (including Lloyds, RBS, Barclays, Santander and the Nationwide Building Society) will be required to share this bank account transaction history data.
For conventional mortgages, this could speed up the mortgage process. The digitalised provision of information about income and expenditure could certainly make it easier for lenders to understand wealth, income and spending patterns of applicants, instead of relying on financial ‘snapshots’ such as P60s. This more personalised approach should certainly ensure that many borrowers receive decisions in principles which are tailored to their individual circumstances, making the application more likely to progress smoothly down the line.
However, whilst Open Banking changes may well spark changes in the mainstream markets—and may even place pressure on conventional brokers—this should have a limited effect on the higher end of the market, in which individuals frequently bank with private institutions, are paid in complicated ways, and are working across global jurisdictions.
Financial management for these individuals is, therefore, a great deal more complicated, and an Open Banking system is therefore unlikely to be useful for speeding up the mortgage process. Instead, high net worth individuals should approach a specialist broker to secure the best mortgage deals.
Some individuals may also be put off by the idea of Open Banking, which certainly raises critical concerns in regard to data privacy and security. Issues of culpability have been raised; with personal financial information being shared across a chain of providers, some are concerned about who will be liable should a data breach occur.
Whatever happens with Open Banking, the changes are set to be slow and steady as opposed to financial management revolution. And if you have a complicated financial profile, a bespoke broker is still likely to be an invaluable tool in your arsenal.