Babylon, 611 BC: the year of the first recorded loan using real estate as security.
Written to Mr. Nabu-etir with an interest rate of 11.3 per cent, our ancient ancestors agreed to the financial instrument that survives two and a half thousand years on.
Now this loan forms the bedrock of the modern financial system – the mortgage.
Providing capital for borrowers to make an otherwise unthinkable home purchase a reality, property buyers are blissfully unaware that they are still using the same simple principle developed in the Mesopotamian age.
So why then – in the era of rapid technological innovation – do we find ourselves interacting with the property market in the same way as our ancient ancestors?
This is the question London’s booming “Proptech” scene has sought to answer. Proptech’s high growth thus far has been thanks to its rigid focus on profitable sections of the housing value chain, leaving mortgage provision to the big established players.
Zoopla, now the first port of call for any prospective homebuyer, offers transparent house price data, while making it easy to find the right place to live.
Next along the chain, Purplebricks took the mantle for being the cheap and easy way for homeowners to sell over the web.
Sellers arrange viewings and negotiate with buyers using simple online tools, without the need for pricey estate agents. Its success speaks for itself, as the platform’s share price has appreciated 300 per cent since listing on London’s Stock Exchange two years ago.
The latest in the flurry of high-profile innovation comes from digital mortgage broker Habito, shaking up the brokerage industry by quickly searching and submitting mortgage applications to tranches of banks and building societies on behalf of customers.
Thanks to its automated platform, Habito removes the hassle of searching for and obtaining a mortgage promise, identifying the best fit from the 15,000 mortgage products on its database.
In the space of months, the automated broker arranged £500m of mortgages across the UK – to the glee of users, because unlike traditional brokers, Habito’s finder’s fees do not apply to applicants.
As impressive as all this innovation may be, the real prize for this nascent startup lies in the untouched remortgaging market.
Unbeknown to most, one in four mortgage holders in the UK are paying over the odds, estimated at an average of £4,000 per year in overpayments.
Switching mortgage has traditionally been laborious and few mortgage holders undergo the hassle. But a simplified means of doing so in under half an hour could change this expensive custom.
This is where Habito comes in. By arming its subscribers with the best deals to swap their mortgage, it could be biggest relief on middle class incomes in a generation.
Habito’s rise is the latest in the tapestry of innovation, and further changes the ancient practice of property exchange.
Though one question remains. All this innovation in the housing chain changes the way we buy our homes, so when will someone in Proptech come up with the solution that transforms the mortgage itself?
For centuries, we have been securing loans using property as the security, but perhaps the time has come for innovators to look for an alternative.