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Fintech in mortgages and real estate-backed loans

Keys to a house

Quick, seamless and hassle-free are hardly the words used to discuss the normal mortgage process in Finland. This is despite the fact that 2019 has been a good year for mortgage issuers, with May-July period showing an increase of 7% in new mortgages from 2018*. The last time banks were this busy financing housing was during the pre-crisis era, in 2007-2008.

Overall, mortgages remain one of the sole personal banking areas that has not witnessed huge disruption, with customers generally having an unpleasant experience being bounced around in lengthy and analog processes. The technology to offer better solutions however exists already for many parts of the process, and many countries are seeing hungry, technologically savvy companies entering the space.

In the U.S. over 60% of mortgages are already being issued by independent mortgage banks like Better Mortgage and Morty**. Australia and U.K have also had their share of such developments, with companies like Lodex and Habito changing customer expectations by making banks come to you to offer their mortgage products or by simply digitalizing the whole end-to-end process.

While banks in Finland and the Nordics are still the main issuers of mortgages, disruption is heading here as the time seems ripe for Nordic fintechs to enter the game. In Sweden they have already launched the ‘mortgage wars’ and investing in property has become possible for basically everyone in Estonia through new crowdsourcing channels.

Below we have highlighted our picks for companies to watch.

1) Enkla founded in 2016 offers mortgage owners a chance to improve their existing loan conditions by paying only 0,95% interest for a 3-year period. Enkla finances its operations by issuing housing bonds on the international market, cutting the costs for issuing loans while making it significantly cheaper for house owners. Established in 2016 they have been licensed by Sweden’s finance authority and have been issuing loans since 2018.

2) Hypoteket and Stabelo are services, through which you can have a completely new mortgage or seek refinancing for an existing one. They offer loans up to 60-65% of the property’s value with rates that compete closely with what banks have on offer. Majority of the customers already had an existing mortgage that needed refinancing but they have already made an impact on banks balance sheets. Overall, they see their competitive edge to be their high level of digitalization, that allows for an improved customer experience.

3) EstateGuru is a property finance operator based in Estonia. They have changed the way projects are financed since 2018 and are focused on building an alternative for both the borrower and investor. They have backed loans in 5 countries, including Finland, and are about to start activities in the UK, Ireland and Portugal soon.

4) DIAS is a Finnish company, leveraging blockchain technology to create a platform to manage various activities on the housing market. Created by Tomorrow Tech in collaboration with the largest banks and constructors, it aims to serve the needs of realtors, builders and financers.

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*Bank of Finland

** Mortage Bankers Association