Emily Hollands, Group Head of Intermediary Sales and Distribution, OSB Group
For decades, mortgage lending has relied on classification. Customers have been grouped by loan to value, credit profile, income type or product type, helping lenders assess risk, manage portfolios and deliver lending at scale.
That structure has served the industry well, but borrowers rarely view themselves through the same lens as lenders.
A first-time buyer focused on getting onto the property ladder is not thinking about lending classifications, just as a home mover balancing changing family circumstances is unlikely to define themselves by their loan to value. Someone reaching the end of a fixed rate deal is focused on securing the right outcome for the next stage of their financial journey, not on how a lender has organised its product ranges.
Their priorities are simple: can they borrow, can they afford it, and does the mortgage meet their needs?
As customer circumstances have evolved, the gap between how customers experience the market and how lenders structure it has become more apparent.
Multiple income streams are commonplace, career paths are less predictable and many people move between employment and self-employment during their working lives. Changing family commitments, affordability pressures and evolving housing needs all influence how and when customers borrow.
Many lending models, meanwhile, still reflect structures developed for a market that looked quite different.
This is not a criticism of traditional approaches. They have helped lenders manage risk effectively for many years. The challenge is that customer behaviour continues to evolve, and lending models need to evolve alongside it.
The question for lenders is no longer simply whether a borrower fits within a particular category. It is whether the categories themselves still reflect the way people borrow today.
A first-time buyer and a home mover may share certain financial characteristics, but their motivations and priorities are often very different. Equally, two remortgage customers with similar profiles on paper may be trying to achieve entirely different outcomes. Looking at lending through a narrow set of classifications can sometimes overlook the context behind the case. It can also shape the way products are designed, potentially placing more emphasis on how lenders organise risk than on how customers experience the market.
Product development has traditionally centred on characteristics such as loan to value, adverse history and other individual criteria. While those factors remain important, they are only one part of the picture. Borrowers tend to think in terms of life stages and financial goals, whether that is buying a first home, moving property, refinancing an existing mortgage or navigating a change in circumstances.
Aligning lending solutions more closely with those journeys can help create products that are shaped around how customers buy, move and remortgage, rather than how lenders categorise them.
The same principle applies to pricing. Historically, pricing decisions have often been heavily influenced by individual characteristics of an application. Advances in technology and decisioning create opportunities to consider a broader range of information when determining pricing and product fit. Rather than relying too heavily on one aspect of a customer’s profile, lenders can build a fuller understanding of the case before deciding the most appropriate outcome.
Underwriting expertise and robust risk management remain central to good lending decisions. What is changing is the ability to apply those principles in a way that better reflects modern borrowing behaviour. Better data, more sophisticated decisioning capabilities and greater flexibility in product development are giving lenders new opportunities to design and deliver solutions that better reflect the customers they serve.
The mortgage market has adapted continuously over the years to meet changing customer needs, and the next chapter will be no different. Rather than creating more product categories or adding further complexity, the opportunity lies in ensuring products, pricing and decision-making are built around customer needs and objectives.
While lenders have traditionally organised themselves around products, customers have always organised themselves around life events. The mortgage market has spent decades asking where customers fit. The next chapter may belong to lenders that start by asking what those customers are trying to achieve.