Habito, the London startup that has spent the last three years dragging the mortgage process online, is to begin direct lending via its own range of mortgages. Starting with ‘buy to let’ mortgages, the move represents the first time the fintech startup has expanded beyond brokerage after it received regulatory approval to become a mortgage lender in its own right early last year.
Eighteen months in the making, Habito says it has developed a proprietary lending platform from scratch in order to be able to offer its own innovative mortgage products that plug some of the gaps in the current market. Founder and CEO Daniel Hegarty tells me he hopes other lenders will eventually want to use the same rails to launch their own digital lending products but in the meantime the company is excited to launch direct lending.
Longer term, Hegarty says the idea is that a rising tide in terms of customer experience and the speed and certainty smarter use of technology affords, will help to lift all boats within the mortgage lending space.
Habito’s first mortgage product is a range of buy-to-let mortgages, claiming to have the widest selection of Loan to Values and fixed-rate periods currently on the market. Using its proprietary technology, Habito says it aims to cut the timeframe from mortgage application to offer in half.
To do this, the Habito platform integrates with the conveyancing process to add more transparency for the homebuyer, while the number of documents needed is said to be significantly reduced. In addition, the Habito “Instant Decision” is a feature devised to replace the mortgage “Decision in Principle,” which the company says is outdated and often unreliable, without sacrificing time to approval.
“All valuations are instructed automatically, fraud checks are automated and all documentation is handled digitally, meaning that customers won’t have to wait for physical post to progress their application,” says Habito.
It is also worth noting that Habito’s direct mortgages will be Habito branded but will not sit on the company’s balance sheet. The mortgages are being funded via a commitment of £500 million investment provided by an unnamed “leading, FCA-regulated financial institution”.
Habito is also keen to stress that its brokerage will operate as a separate business line and continue to provide “free, impartial, whole-of market mortgage advice to its customers” (as it is regulated to do so). The fact that the FCA approved Habito becoming a lender alongside running its brokerage business is also noteworthy and suggests that the U.K. regulator isn’t concerned about the company’s ability to keeps its business lines segregated. How the wider market views the development by Habito to become a lender and a broker remains to be seen.
Meanwhile, Habito says that company buy-to-let and portfolio landlord mortgages will launch later this year. Beyond this, the startup is working with a number of “large financial institutions” to bring a range of residential mortgages to market in the coming months.
One area that Hegarty says is ripe for innovation are mortgages suitable for self-employed people who don’t have a traditional financial footprint. Another opportunity the startup is eyeing up are mortgages with a much longer fixed term, which are more common in other countries but in the U.K. are typically restricted to two to three years.