With the focus on delivering an easier, cheaper personal banking experience, this move is expected to greatly affect the mortgage market, as well as buy-to-let landlords.
In this blog, Vincent Burch will take a closer look at open banking. We will examine the benefits for buy-to-let landlords, plus how it may transform the mortgage market.
Initiated by the the Competition and Markets Authority (CMA), open banking requires all UK-regulated banks to share financial data with licensed competitors.
Therefore, any regular payments or spending habits (information from your bank statements) will be directly accessed by authorised financial providers. However, you must have given your consent.
The aim is to encourage more competition within the financial sector, hopefully leading to more innovative services for money management. Organisations can now share data, thus creating a more consistent format for personal banking, such as on budgeting apps.
There are many advantages for consumers, including having all their financial information in one place and offering insight about spending patterns. What's more, financial records can now be managed through a single app. It's a far easy and more organised way to handle your finances.
Theoretically, mortgage lenders can now interact with each other's platforms. This means mortgage lenders will have access to the mortgages, accounts, savings and loans of a potential borrower. Therefore, any affordability assessments would become unnecessary, creating a quicker, more focused, mortgage application process.
Buy-to-let landlords are currently served by over 12,000 traditional brokers. However, a increasing number of online brokers are pushing technologically advanced solutions, such as a greater range of deals and quicker offers. Therefore, open banking will be a welcome development for brokers. Now they too can quickly and accurately compare mortgages tailored to the borrower's needs.
Finally, focusing accounts in a single app offers valuable insight into a portfolio's income and spending. This will save precious time aggregating data in a spreadsheet!
If you have any questions about open banking, or would like to find out more information, please get in touch. Andrew Bowls is our head of buy-to-let mortgages and will be happy to answer any of your questions. Please email [email protected] or call 01603 340 644.