The rise of robots offering to invest your cash, find you a cheaper mortgage and plan your financial future has been swift – but can you really trust all the claims?
Not a day goes by when This is Money does not receive news of the launch of another new app promising to be the game-changer in fintech.
They use language like ‘disrupting the big banks’ and ‘automating the entire process’ and typically, they’re all eager to point out why they’re better than the competition.
Fintech apps are multiplying like rabbits and all claim to be the best – who do you trust?
We spend a lot of time sifting through their marketing, testing out their services and talking to both firms and customers.
But when a firm is new, it can be hard to know how it’ll perform in reality versus the hype it launches with.
So where does all this leave the customer? Faced with fintech apps multiplying like rabbits and all claiming to be the best – who do you trust?
And, should you trust fintech just because it’s technology when we’ve seen how badly that can go wrong for us?
Witness the catastrophic failures in technology services on offer from TSB earlier this year, the nightmarish IT meltdowns at Lloyds, Halifax and NatWest over the years – not to mention last year’s hacking of credit rating firm Equifax that saw nearly 700,000 UK customers lose valuable personal data.
Robo-mortgage advisers
The latest robo-adviser launch is Dashly, another new online mortgage adviser.
It commissioned an independent review of its offering by Moneycomms personal finance expert Andrew Hagger in a bid to prove that their team delivers what they claim.
Hagger seems relatively impressed by Dashly, but he also suggests perhaps we shouldn’t put our blind faith in every new fintech that comes along.
‘Sometimes there’s a bit of fintech for fintech’s sake,’ he says. ‘ To be frank there’s not an awful lot of difference between the different robo-mortgage advisers.’
And yet,having rigorously tested the system he concludes that Dashly is ‘not just another of the growing number of new robo-mortgage advisers’.
Why?
Because it actually does what it claims to do – in this case, continuously monitoring your existing mortgage on a monthly basis and automatically alerting you the minute you could save by remortgaging to a new deal.
Hagger’s investigations also revealed that other robo-mortgage advisers that he says claim to do this, in fact, don’t.
He said: ‘Yes, there are other robo-type providers carrying out remortgage comparisons, but they don’t offer the same level of ‘always on’ automation.
‘For example with Dashly you don’t have to wait until a few months before your deal is due to expire, you can start comparing a year or more before your current term ends if you wish.
‘Another key differentiator is that once you’ve entered your mortgage info there’s nothing further you need to do – Dashly updates your data for you every month and keeps scanning the whole market and comparing every day until it finds a deal that saves you money and makes it worth switching.
‘Dashly automatically updates your mortgage balance, remaining term, loan-to-value and property valuation on a monthly basis – whereas Trussle for example requires the customer to log back in and update their information every three months – it’s a big difference.’
Weighing up where to go for mortgage advice can be tricky as it’s not easy to tell firms apart
The robot mortgage rivals
Trussle, the online mortgage adviser Hagger mentions above, is just one of a growing number of robo-brokers that have launched in the past few years. There’s also Habito, Dynamo, Mojo, Mortgage Gym, Hooski and Hoocht.
Meanwhile, London & Country, a traditional broker and This is Money’s mortgage partner, launched an online application process late last year.
Each service offers a slightly different approach to online mortgage advice, but whether you chat to a bot on your mobile, use Facebook messenger to speak to a broker, communicate through WhatsApp, or fill in your information in an online form, ultimately they should all provide you with a suitable mortgage recommendation.
Ultimately all online mortgage brokers should provide you with the same mortgage recommendation
This is because all of these firms, Trussle and Dashly included, are regulated by the Financial Conduct Authority and therefore legally have to recommend you the most suitable mortgage available for your circumstances.
That might be the cheapest; it might be the second cheapest with a lender that they know you’ll be approved by.
Either way, they have to be sure it’s right for you because if you complain at a later date and they can’t prove why they made that recommendation, you could be eligible for compensation.
This means they all go out of their way to make sure you get the best deal.
Does it matter how the mortgage robots work?
According to Robert Sinclair, chief executive of the Association of Mortgage Intermediaries – the trade body for mortgage advisers, how your robot mortgage adviser works does matter.
‘We’re seeing a lot of technology development from both new and existing mortgage advice firms and that’s great for customers,’ he said.
‘But these firms will need to be careful that they deliver against the commitments they make as all intermediaries have to be mindful of both FCA financial promotion rules and the Ombudsman’s views on ongoing service.’
The financial watchdog is also concerned about how difficult it is for consumers to find a mortgage adviser – online or not.
In a paper published in May this year, the regulator said: ‘There are websites that can help consumers identify a local intermediary to help them.
‘However, even with these tools there is a lack of information to make it easier for consumers to consider and compare options based on the nature, quality and costs of services.
‘And while some intermediaries have developed business models to serve consumers with more complex circumstances, the tools offer only limited opportunities for intermediaries to differentiate themselves.
‘As such, it is not easy for consumers to identify intermediaries which meet their needs.’
Why is there a digital mortgage battle?
The reason that competition to offer the best online mortgage proposition in the market is becoming so fierce, is because consumers are increasingly fed up with the lengthy, complicated, jargon-strewn process they can have to go through – even just for a straight, like-for-like remortgage.
If robo-advisers claim to do online or on your mobile in 30 minutes what traditional mortgage brokers can take a couple of hours to do in person or on the phone, or a bank or building society even longer, which would you choose?
This is why each of the online players is trying to come up with the best bells and whistles to win your custom.
It has resulted in some confusing claims about the extent of automation.
Here’s an example.
On 11 September 2018 Trussle distributed a press release to all media stating: ‘It’s vital that homeowners know when the introductory period of their mortgage is coming to an end and are able to switch when it’s right for them.
‘With our free mortgage monitoring service, borrowers are able to relax knowing that their mortgage is being proactively looked after and that they’ll be alerted and guided through the switching process when it’s time to switch to a better deal.’
But according to Hagger today: ‘Trussle requires the customer to log back in and update their information every three months.’
A statement from Trussle said: ‘Without asking customers to update their details, it’s not possible at this stage to accurately track the balance and loan-to-value without knowing whether the borrower has made any over-payments – this is made directly to the lender, bypassing the broker in most circumstances.
‘To avoid any errors, we simply ask customers to update their circumstances every three months.
‘This allows us to take account for changes in mortgage balance and LTV, as well as additional important information including changes to job status, salary, family planning, and disposable income.
‘We’ll always look to retain some form of regular customer input as it allows us to be as accurate as possible with our mortgage recommendations.
‘It’s worth also noting that we will be automating the process using open banking when it has the products available to do this. At the moment there are tools out there, but they compromise security.’
Can you trust a mortgage robot?
‘There is no reason not to trust any of these robo-advisers and I’m confident they’d all find you the right mortgage,’ says Hagger.
‘There is a lot of in-fighting between them, but ultimately, I believe it’s because they are trying to help the consumer get a better deal.’
That said, do your research, read customer reviews online and make sure that any adviser you instruct is registered and fully authorised by checking the FCA register.
This is Money partners with Vouched For, a comparison service that helps you to find a rated financial adviser.
What is Dashly offering?
Dashly is the newest kid on the robo-mortgage adviser block and launches next week
Dashly is the newest kid on the robo-mortgage adviser block and it’s arrived with a bang.
Hagger’s assessment, independently made, is that the fact Dashly automatically calculates what you could save on your mortgage and tells you when you should switch makes it a better offering than the others.
Like the other online advisers it also employs real brokers helping borrowers with any new applications.
The firm plans to automate and streamline some of the application processes in time but will claims it will always retain an element of human interaction.
This may take some of the pain out of switching mortgages.
You put your information into its system once and it says it can automatically monitor if and when you can switch to a better deal and save money.
It automatically calculates your monthly balance so you can keep an eye on it, and uses that and the terms of your existing mortgage and your property’s current value to check whether you could remortgage and save money.
To do this, it takes into account whether you’ll be hit by any early repayment charges by exiting your current deal early (three years into a five-year fixed rate for example) and what you’ll save by switching to a new deal.
Hagger said: ‘Many people would ordinarily think that their early repayment charge would more than wipe out any potential savings, but as my test application shows it can still be a feasible option towards the latter part of a fixed or discounted tie in.
‘Dashly will help some people who would otherwise have not bothered comparing.’
Should you use Dashly?
According to research published by Trussle earlier this month, homeowners who lapse onto their lender’s standard variable rate when their existing deal expires are stung with over £2,600 a year in extra interest.
The study, which looked at 16 major UK lenders, analysed the jump in interest charges from each provider’s best two-year fixed rate deal to their associated SVR, which a borrower is typically transferred to once their introductory period comes to an end.
At the end of August, the average homeowner slipping onto their lender’s SVR after the initial two-year fix faced an extra £2,664 a year in interest payments, equating to £222 a month.
Across the UK there are two million borrowers currently on an SVR, who could collectively save £5.3 billion a year by switching.
Clearly there is a compelling reason to remortgage if you fit this description – but then, you could do that with any of the online advisers or any mortgage broker over the phone or on the high street.
The average homeowner slipping onto their lender’s SVR after the initial two-year fix faced paying an extra £2,664 a year.
What makes Dashly interesting is the ongoing monitoring service which automatically updates your data in real-time.
Sinclair said: ‘Customers who may struggle to meet their existing lender’s criteria and are hoping new lenders or products will assist them in future are more likely to benefit from this type of newer technology.’
Hagger added: ‘There is undoubtedly a need for this type of non-stop whole of market mortgage sourcing as a vehicle to stop people from overpaying and encouraging them to borrow smarter.
‘While it’s simple to compare credit cards and savings accounts, a regular trawl of the mortgage market is nigh on impossible without an automated tool such as Dashly – it’s taking the mortgage comparison site benefits to another level and providing something more fit for purpose in this fintech-enabled era.’
