By Mark Blackwell, Lending & Surveying Services Director, eTech Solutions
Mortgage Introducer, November 2015
UK housing market activity has climbed to its highest level in six months and the second highest monthly level on record, new data shows. September saw just 0.5% fewer valuations carried out than in March 2015 which was the highest on record. On an annual basis, total valuation activity was up 29% compared to September 2014, after a 23% month-on-month rebound since August 2015.
The continued good fortune will prompt lenders to ask the usual tactical issues about capacity in the valuation market, especially in light of a growing remortgage market even though the likelihood of a rate rise remains a distance prospect for now.
But in tandem to this tactical check on the industry’s ability to deliver valuations, more strategic action is taking place too. Organisations across a wide range of industries are recognising the potential of re-engineering to deliver previously unimagined leaps in performance. The competitive climate and the pace of change within the company and outside in the market are encouraging a more coordinated and fundamental rethink of the planning and design of business activity. Two main approaches to re-engineering have emerged. The first – known as “process re-engineering” offers the opportunity to rethink and streamline individual processes; the second, which is more accurately described as “business re-engineering”, provides an approach to redesigning the entire business behind a more focused, competence based competitive strategy. The central challenge in re-engineering is to understand where and how business leaders can create value for both customers and shareholders. Now, banks and lenders are asking themselves some fundamental questions about what they lend, to whom and why and how, if it is a necessary activity, and if it can be improved. Achieving the benefits and re-engineering demands active commitment and participation from the chief executive downwards.
Shareholders and customers demand a competitive edge and margin gains. It’s not enough to make what we have more efficient, it is now becoming more of a priority to imagine how we can deliver our core competencies in a totally different way.
By breaking down the silos of areas such as product design, risk management, and sales, lending can be delivered in a significantly different way. Broker portals now allow brokers to see the decisions and progress of valuation decisions that are available. Mobile technology for valuers used correctly offers a completely new way of working and living and managing risk efficiently. Combined with giving lenders access to data to make decisions before instructions are even issued is very much about a whole change to the business. Not all cases require valuations but some niche product areas might. Indeed, the smart use of data and understanding risk, means UK wide lending policies may become a thing of the past.
If you consider the many micro markets that exist in London alone, the right knowledge in the right hands at the right time could make a distinct difference to lending appetites and consequently the success of any application. Technology has a huge part to play in delivering this flow of information for experienced risk managers to make effective decisions.
Market Share Pressure
As the property market welcomes new entrants to lending, the pressure on market share can result in either a relaxing of credit conditions (we have already seen rates being cut on higher loan-to-value products) or by delivering loans in more efficient and smarter ways that de-risk the business but save time too. The increase in lending will drive more valuation business but not in the way we may think. The arrival of AssocRICs qualified valuers eased the pain in terms of the squeeze in previous years but if the vanilla lending continues to become more and more automated in terms of valuations, then those valuers remaining will be doing the harder cases that require experience and expertise. Understanding vast amounts of new build in the context of our ageing housing stock will mean experienced valuers are required for some time to come.
Re-engineering of this nature is more akin to taking a clean sheet of paper to a business and, given what is currently known about customers and their preferences, developing a new organisation which will optimise the process of creating satisfied customers. Re-engineering is the process by which the organisation that exists today is retired and the optimal version of the new organisation is constructed for competitive edge and a brighter tomorrow.
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