Website facilitating online auction of mortgages set up

Website facilitating online auction of mortgages set up

	Published : Mon, 23 Jan 2006 15:55 By : Phil Bateman Print this Story

LONDON: A new website has been launched, which will conduct online auctions of home loans in Britain. The site, Mortgagebundles.com, allows lenders to bid against each other for home loan business.

The site creates "bundles" of similar borrowers and allows the lenders to bid on each group. The lender that offers the lowest deal wins the auction, although the borrowers can accept or refuse any deal.

Among the first batch of 14 lenders to be registered on the site is Nationwide. The 14 lenders constitute around 50 per cent of the mortgage market, the owners of the site claimed. Other lenders like HBOS, and Abbey are planning to join.

The co-founder and chief executive of Mortgagebundles.com John Gibson said his venture is addressing the balance of power so that it is firmly in the hands of the consumer, not the lender. "Our prime objective is to drive down the cost of taking out a mortgage by removing the middleman and creating the most competitive market place.”

The promoters said they expect more than 10 per cent of all mortgage lending in the country to be conducted through their site by 2010.

It is estimated that nearly 11,000 applications for mortgage finance worth around 1 billion pounds are completed everyday in the country.

While the borrowers can freely register and make use of the site, lenders will be charged a monthly fee to access the borrower "bundles" and bid and another fee if the deal is through.

Gibson said the process of "bundling" can be used for selling other products like insurance and annuities.

The site could impact the mortgage industry in the country as the auctions could attract lenders from other European countries, which will offer competition to the British firms.

To participate in the auctions, borrowers have to register giving information on their requirements and their credit history. They are then put in the appropriate "bundles" with similar needs, which are then placed on online auction among lenders, who bid against each other to offer the "bundle" the best deal possible in a timeframe. The borrowers are informed about the lender who is offering the best deal and are invited to apply.