Two-thirds of mortgage lenders will continue to invest in IT systems over the next two to three years despite heavy investment during 2004 to meet the requirements of the Financial Services Authority, research reveals.
A survey carried out by Unisys claims increasing regulation and changing market economics are the driving forces behind IT spending.
It says future IT investment will focus on standardising many mortgage origination software solutions adding this is a shift from the current position. At present, 71% of all software applications in-use are customised packages. But respondents indicate they expect 50% of all software applications in-use to be standard packages in the future.
Unisys says its research also reveals the bigger lenders are most concerned with differentiating their market proposition, in particular, larger lenders feel to remain competitive in increasingly tough market conditions they will need to diversify their service lines into non-lending areas, as well as developing new niche areas, such as sub-prime products.
Jeremy Smeddle, mortgage consultant at Unisys, adds: "We spoke to a number of big lenders who said this was their poiicy. They were not specific but one senior business manager I spoke to said they were not going back to the days of buying up estate agents but were looking at other service areas."
Meanwhile smaller lenders are more concerned with improving process efficiency, to increase margins and provide competitively priced products, adds Unysis.
But Ray Boulger, senior technical manager at mortgage broker John Charcol - recently sold by lender Bradford & Bingley - says it is unlikely that if lenders buy a brokerage it will make that great an impact on their bottom line, although he does not discount the possibility lenders may begin to buy a stake in intermediary businesses.
"There has to be an alternative reason to buy a mortgage broker as well, because otherwise a lender could find itself in the position of having bought the business but losing the staff. There is a precedent for a lender buying a broker as we have seen recently with West Bromwich Building Society and Mortgageforce but I do not think we will see the larger brokers being bought up by the lenders," he adds.
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