The Intermediary – April 2025 - Flipbook - Page 77
T E C H N O L O GY
Opinion
Whatever comes
next, adapting is
key to opportunity
I
f there was a watchword for
2025, I think it would have to
be ‘volatility’. Nothing is ever
certain in life, but the first
quarter of this year has really
blown uncertainty out of the
ballpark.
The Trump Presidency has triggered
huge swings in market confidence
globally. The economic impact cannot
be underestimated. On 10th March,
according to Reuters, Trump’s tariffs
spooked investors, with fears of an
economic downturn driving a stock
market sell-off that wiped off $4tn
from the S&P 500’s peak last month.
US inflation forecasts have soared
33% in less than three months, with
the Organisation for Economic Cooperation and Development (OECD)
upping its US inflation forecast for
2025 to 2.8% in March, up from its
December 2024 estimate of 2.1%.
This stuff is very real – for
Americans in particular, but the
ripple effects are being felt widely.
There are those who argue this could
actually be positive for Europe, which
has taken a more balanced position on
Russia and Ukraine and looks set for
marginally less aggressive US trade
tariffs. We hope.
European markets are currently
bearing this out. An article in
Morningstar quoted Will James,
portfolio manager of the Guinness
European Equity Income Fund, as
saying: “Whether he meant to or not,
[Trump] has probably engineered a
period of European revival.”
The big US tech stocks, including
Tesla, have seen eyewatering falls
in value, while European stocks –
traditionally unloved – have seen a
rebound. In the UK, banking stocks
have performed particularly strongly,
supported by the Bank of England’s
dovish position on interest rates.
Perhaps driven by competition to
secure as big a chunk of the purchase
mortgage surge ahead of the Stamp
Duty rise in April, the biggest lenders
have been slashing fixed rates – a
significant number were offering rates
more than 0.5% below the base rate.
This is indicative of several things.
UK property is seen as a relatively safe
haven for investors here and abroad.
Money has poured into the asset class
over the past decade led, interestingly,
by some of the largest US-based private
equity houses. Money is also flooding
in from the Middle East, China and
others. This presents a challenge
for lenders that must get funding
out of the door, pushing them to use
prey much the only lever they have
to retain – let alone gain – market
share: pricing.
This sounds great, but the market
is only too aware that things can turn
at any moment. We are about to see a
major hike in taxes across the board
in the UK, affecting both individuals
and businesses. There have been tens
of thousands of job cuts already, and
more are likely to follow.
For households whose income
remains steady, there is the threat of
contracted discretionary spending,
and that has a tangible impact on
borrower affordability. While lower
rates are easing pressure on that front,
there’s always a flipside that lenders
are mindful of.
Second-guessing
In terms of pricing, it’s prey wild out
there at the moment. I suspect some of
this is to do with the fact that lenders
still relying on legacy platforms are
forced to price in steeper cuts ahead of
price competition actually requiring
it. Why? Because those systems make
product refreshes a big ask. They take
time to implement. They’re based on
JERRY MULLE
is UK managing director
at Ohpen
algorithms that must second-guess
risk appetite from competitor lenders.
While most of the largest lenders
have patched on slicker front-end
systems, it’s likely they are still having
to feed in to platforms that are decades
old in some cases. It’s clunky. It’s slow.
It’s forcing lenders to rely on data
that’s out of date. Don’t get me going
on the implications for mistakes,
fraud and cybersecurity.
Investing in a wholesale
replacement of back-end lending
technology platforms can seem like a
huge job, but the reality is that every
day lenders delay moving to cloudbased technology is a step further
down the competition curve.
Most lenders will tell you their
top priority is to lend. They want
money out the door to pay for retail
deposits and cover funding lines
already agreed. They want to serve
their customers well and that means
having appropriately priced products
available at the right time.
This should be the biggest driver for
the case to move to new tech systems.
As more lenders do, the worse it will
get for those that don’t. Trying to
compete sensibly and responsibly
with others that are using real-time
data, are plugged into opensource data
from other parts of the homebuying
markets, and can design really tight
products and get them out to market
before the commercial opportunity
has gone – it’s going to get harder and
harder for legacy systems to keep up.
In a world where volatility is the
new norm, brokers and borrowers
need agility, connectivity and
security if we are all to have a hope
of maintaining a meaningful
competitive advantage long-term. ●
April 2025 | The Intermediary
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