Stress and Mortgages: Are UK Banks Failing Homebuyers?

By Gloria Methri

A coordinated effort is needed to make the loan application process more transparent and inclusive and to improve real-time data sharing between banks, brokers and consumers.

A new report from Ohpen, a SaaS core banking provider, has highlighted the impact of outdated mortgage application systems used by UK banks. The report reveals a correlation between these archaic processes and heightened stress levels among applicants.

According to the study, nearly half of all mortgage applicants (46%) associate the loan application process with anxiety, with a staggering 30% wishing they had a clearer understanding of the application steps beforehand to alleviate their stress. Furthermore, 37% of respondents cited delays as a major contributor to their frustration, while 36% complained about excessive paperwork. A notable 15% expressed a desire for improved online tools to streamline their experience.

The research also uncovered a significant generational divide. Among homeowners aged 24 to 35, 38% regretted their decision to buy, wishing instead that they had opted to rent longer. This age group is particularly vulnerable to the stresses associated with mortgage applications, highlighting the urgent need for better support and education.

Ohpen’s findings suggest that financial literacy plays a crucial role in mitigating the anxieties linked to mortgage applications. An overwhelming 81% of respondents advocated for including mortgage education in secondary school curricula, reflecting a widespread acknowledgement of the lack of understanding surrounding basic mortgage terms prior to the application process.

Jerry Mulle, UK Managing Director at Ohpen, said, “These findings are a damning indictment of the inefficient mortgage application processes delivered by banks’ archaic legacy systems. Hundreds of thousands of Brits apply for a mortgage every year, and the impact on mental health, consumer spending, and overall productivity is significant. Banks’ processes have not modernised—what was cutting edge 40 years ago is no longer fit for purpose.”

The consequences of these inefficiencies extend beyond mere frustration. The study revealed that 25% of 25 to 34-year-olds resorted to comfort eating due to stress induced by their mortgage applications. Others reported crying more frequently, even at work, and increasing alcohol consumption as coping mechanisms. Alarmingly, nearly a quarter (22%) of younger adults (aged 18-24) admitted to calling in sick due to stress linked to their mortgage applications.

This widespread anxiety is not just a personal issue; it has broader implications for workplace productivity. More than 10% of respondents expressed a desire to have known in advance how much time they would be distracted by mortgage-related admin, underscoring the need for a more efficient system.

The research calls for a coordinated effort to modernise mortgage application processes, emphasising the importance of real-time data sharing between banks, brokers, and consumers. By embracing technology and prioritising transparency, the industry can alleviate the burdens faced by homebuyers and promote a healthier financial environment.