The numbers involved are pretty staggering - there are more than £1.7 trillion (yes, trillion!) worth of residential mortgages in the UK with more than 100 different mortgage lenders!
Compared to lots of other countries, buying and owning a home in the UK is a national obsession. Years spent budgeting to scrape together a deposit, hours of imagining yourself in that dream home you saw on Rightmove, followed by a mere 40 years of repaying until you’re mortgage-free.
At Monzo, we want to make money work for everyone and we believe we aren’t achieving our mission if we don’t help our customers buy their first home and feel empowered to understand their mortgage better. Mortgages are often a person’s single biggest expense so we want to help in these important moments.
We’re the only bank in the UK that allows you to see your mortgage, irrespective of your lender, in your banking app.
We’re proud of our journey so far and in this blog post we’d like to give you a behind-the-scenes peek into how we’ve built one of the best new products at Monzo!
Foundational discovery
A little knowledge can be dangerous. It is easy to fall into the trap of thinking you know enough to start building a new proposition but often you’re working on lots of implicit assumptions and old information.
At Monzo, we’ve managed to build great products and services off the back of a strong understanding of the market landscape, competitors, and of course our customers’ needs. We intuitively understood that there was real potential but that doesn’t mean we conclusively knew the answers to:
What needs do Monzo customers specifically have and how does it change as their life circumstances evolve?
Which segment of customers should we build for first?
How might we design a proposition that meets our customers’ needs whilst leveraging the things that Monzo is best at; not just copying “the way it always has been done”?
As is often the case at Monzo, we needed to go deep and get to know our customers intimately, so we kicked off a 3-month discovery project, using the diverse skills of a User Researcher (Clare), Product Designer (Yulia), and Special Projects (Harry). This would help us uncover the customer needs, validate them and assess whether they could be worthwhile for Monzo longer term.
First, we started by recruiting a representative sample of almost 50 customers across 3 broad Homeownership life stages, which were:
“Saving” - On the (very) long path of saving for a deposit.
“Buying” - Recent first-time buyers.
“Managing” - More established homeowners who are working towards being mortgage-free or moving to their forever home.
We then ran interviews, understanding how Monzo currently fits into their daily lives, and what was/wasn’t working in achieving their homeownership goals. This phase is crucial and can’t be rushed. You have to authentically listen to your customers, hear what they mean (not just what they say), and ask the right questions to understand what would truly help their financial lives.
We identified 35 customer needs in our interviews, which shows how much of a rich opportunity there was. But how would we decide which were most important?
This is where data work comes in. We sent out a survey and got over 2,000 responses which segmented these customers into our 3 broad life stages along with financial attitudes and asked them to evaluate those 35 customer needs. To get worthwhile insights, we asked these respondents to evaluate how well-served these needs were by the patchwork of financial services that exist today and then how important it would be to have a proposition that effectively tackled it.
We then created a graph that plotted how underserved and important these needs were - where the top-right of the graph is most exciting.
![A 2x2 map ranking the customer needs we identified in research based on how important and how underserved they were](https://images.ctfassets.net/ro61k101ee59/7fkN7lkd7JCIDmgfeVeC7S/9b1f7649b69e641bcab74797c25b69cf/Untitled__6_.png?w=2400&q=75)
From there, we ran a commercial and capability analysis to better understand:
Does Monzo have an advantage in tackling these needs compared to our competition?
Can we see an opportunity to provide more value to other teams we work with (whether that’s Savings, Investments, or elsewhere) or can we see a path to earning direct revenue?
Are there demographic, societal, or commercial reasons to favour one life stage over another?
Our discovery process ended just as the infamous “mini-Budget” of September 2022 took place and interest rates on government borrowing (and therefore mortgages) skyrocketed. We could see that the purchase market might slow whilst we had millions of customers who were facing the prospect of massive increases in their mortgage payments in the years ahead.
Whilst helping our customers save to buy and then go through the purchase process was incredibly appealing, we ultimately decided to focus on helping our existing homeowners with a mortgage first.
Setting the right goals
When you’re working on a brand new / “0→1” product area, it’s really important to work with your team and stakeholders to set the right goals and measures of success.
How do you do that when you don’t know what your product will become or how your customers will use it? How do your stakeholders know whether things are on track and continue to be your team’s biggest champions?
The riskiest assumption we had was whether we could convince our future users that our new product was differentiated and valuable enough compared to the patchwork of products and services they used before. If we could prove that then we felt we could establish a large and engaged user base.
We agreed with our leadership team that our focus would be building a large number of customers and creating healthy engagement. Therefore we needed to have difficult conversations about not earning money for Monzo for at least 6 months - so that our team could focus solely on driving engagement, rather than trying to tackle too many things, badly.
Turning a promising opportunity into reality
Our initial focus was on existing homeowners with a mortgage. One of the biggest unmet needs for these customers was the visibility of their mortgage progress. Based on our market analysis and customer feedback many mortgage lenders in the UK fail to provide the desired level of visibility through their online tools and services.
We decided to investigate how we can leverage available mortgage data from the TransUnion API (a credit reference agency) to benefit our customers.
Even though the idea sounded straightforward, the mortgage details we received didn't contain all the information we needed to offer personalised insights back to customers. Additionally, we faced some tricky scenarios that required careful consideration. For example, the lender names in the data were full of abbreviations, acronyms, and aliases, which we had to map to the high street names that customers are familiar with - for instance, Barclays Bank Plc became simply Barclays.
The most challenging issue we faced was that we were unable to get the interest rate or deal details for the mortgage. We only had access to the minimum monthly payment and balance history. Using this information, we could estimate the term and interest rate for the customer, but there were cases where these estimates could be incorrect, particularly if the customer had a more complex mortgage product (e.g. interest only) or made overpayments.
Over time, we solved these problems by making it clear to customers which information we had access to and which we were estimating. We also provided customers with the option to add additional information, such as their monthly overpayments or deal length, to help us improve our estimates.
This attention to detail alongside continuous iteration and learning builds a defensive moat that is hard for your competitors to quickly copy.
We released the product in April 2023, providing our customers with a smooth journey of connecting their mortgage to the Monzo app. The flow consists of 3 simple steps and requires no account details, it just needs consent to get mortgage data from their credit file. It takes less than 30 seconds! Customers were absolutely amazed by how magically simple and fast the process was!
![3 screenshots showing the “connect your mortgage” journey](https://images.ctfassets.net/ro61k101ee59/76O5nYKy5VYvXFiw7Z1xV6/0e2f389ca4d7aa839560c54960ed56a2/01__4_.png?w=2400&q=75)
![Customer quote: This is just great, much better than what my lender shows me on their website. Also, the fact that you just knew that I have a mortgage and pulled the details is magic. Well done!](https://images.ctfassets.net/ro61k101ee59/CoVicOU7SGMdQ6lAjkfvo/960a7450762fb8371b1c2388264e8538/2__6_.png?w=2400&q=75)
Taking the next step – building the best mortgage overpayment calculator
From the initial discovery, we knew that one of the biggest needs of homeowners is whether overpaying a mortgage is the best use of their spare money. A mortgage overpayment calculator is not an innovative or fresh idea. There are plenty out there. However, all of them require customers to provide lots of mortgage details before showing useful insights. On top of it, the insights are often not presented in the most easy-to-understand and actionable way.
We were eager to address this, confident we can leverage the available mortgage details and create an insightful and user-friendly experience for our customers.
![2 screenshots showing the overpayment calculator - highlighting that users can shave time off their mortgage and save money by making extra payments](https://images.ctfassets.net/ro61k101ee59/5wD73tpcqqBxibY3ljJC7y/cf9c1f4788caf70a56c1234f9efc18d2/3__6_.png?w=2400&q=75)
We are aware that many customers can't afford large overpayments. But we also know that most people don't realise how a small regular overpayment can accumulate into massive savings over many years. At the entry point to the feature, we've shown an insight into what it would mean if a customer just rounded up their current monthly mortgage payment.
For an average customer, rounding up a monthly payment of about £50 saves up to £5,000 in interest and reduces the length of their mortgage term by 2 years.
![Customer quote: This is amazing! Learned more about overpayments in 30 seconds of playing in the Monzo app than the entire house buying process 🤯🤯🤯 It should be a legal requirement for mortgage providers to educate their customers to at least this level](https://images.ctfassets.net/ro61k101ee59/5tyk3j3mwBUsXyjJPknyrR/89ded280433a4dbd6ac5dba8981132a4/4__6_.png?w=2400&q=75)
Supporting customers in navigating the anxiety of rising rates and remortgaging
June 2023 saw the UK mortgage market reach challenging heights. We wanted to react to the new reality and help customers be able to plan for their future home finances.
The deals on the market at that time meant almost £400 extra per month for an average customer. Understanding and planning for it is crucial for budgeting. We saw it as our mission to help people prepare for this change.
![3 snapshots of BBC articles from summer 2023 with the following headlines: Average five-year fixed mortgage rate above 6%, warning homeowners face 20% drop in disposable income, mortgage lender urges those struggling to seek aid](https://images.ctfassets.net/ro61k101ee59/64S1M9iPhWuRk37qwIlWlq/9b8292d2b0508e4856f839cda3abf26c/5__4_.png?w=2400&q=75)
We designed and built a new helpful tool for our customers – an interest rate calculator. With its user-friendly layout, it provides a clear illustration of how monthly payments would fluctuate with varying interest rates. Moreover, for customers nearing the end of their deal, there's an added feature to check the specific impact of a chosen rate.
Again, because we already had the necessary mortgage details, there was zero friction for customers to see these helpful predictions.
![2 screenshots of the interest rate calculator showing a range of different interest rates and the impact on mortgage payments.](https://images.ctfassets.net/ro61k101ee59/4mC47p1aeOeYlaTUdaru7O/d10425fbde6eaaec9d3969bc012e2b9b/6__3_.png?w=2400&q=75)
As a quick follow up we shipped mortgage deal end reminders – a feature that was complementary to the interest rate calculator. It would also play an important role in future planning and avoiding budgeting troubles.
If a customer doesn’t arrange a new deal in time, they slip onto the expensive Standard Variable Rate (SVR), which at that time meant almost £600 extra each month 😱
Some people (especially first-time buyers) don’t know that remortgaging can take months and months until it’s sorted. We wanted to support and educate those customers and allow them to get reminded any time from 1 to 6 months out.
![2 screenshots showing the setting of a mortgage deal reminder.](https://images.ctfassets.net/ro61k101ee59/4kWlt5kuM5Nky98FgmG0jo/104cb2a92a1882a7e2626562baf8e92b/7__3_.png?w=2400&q=75)
Depress → success: visualising your home’s equity
We had some early success with lots of customers connecting their mortgages. However, around 5% of all mortgage-holders were still disconnecting. Many companies might be very happy with those numbers… but not us!
We put a feedback form into the disconnection flow to see what the primary reason was. The feedback we saw was remarkably consistent – “this is depressing”.
![Screenshot of connected mortgage view. Customers quotes: depressing to look at; makes me depressed seeing how much I owe; depressing honestly; depressing to see the mortgage balance; it’s too depressing; all good, just depressing to look at lol.](https://images.ctfassets.net/ro61k101ee59/5wWOBY7izdNmEx0zEdgO5/640fe1de488f31ef3bbd2d4e197faa8f/8__2_.png?w=2400&q=75)
We’ve thought a lot about how we can change this negative customer sentiment. At first, it seemed like there was little we could do. We were just showing the reality and if someone prefers not to see it – it’s their choice.
But then we realised that the page layout with a huge outstanding mortgage balance is showing only one snapshot of the customer's homeownership journey. And it is completely missing all the positive progress customers had made on the way to owning their home: their initial deposit and years of mortgage payments.
Over a couple of months, we’ve transitioned from a mortgage-focused to a home-focused view, where equity (customer’s progress) sits at the heart of the experience, which is so much more positive and encouraging. The remaining mortgage to pay is still there, but it’s not the leading figure anymore. Customers can also add their home picture to make this space feel more personal.
![2 screenshots showing before and after mortgage details views.](https://images.ctfassets.net/ro61k101ee59/37SPVsbldlQ13S2RTqa1Gh/e4d4f990b24425a2f0dc1d29bc2b36a5/9.png?w=2400&q=75)
How did we do that? We downloaded >20 million(!) residential transactions from the open source Land Registry datasets which include important information like purchase price and date. Using this, the vast majority of customers are able to find their property details in seconds. After that, we estimate their home’s current market value based on local market information for their property type from the Office for National Statistics.
![2 screenshots showing the customer’s property details found at the Land Registry and the estimated home value.](https://images.ctfassets.net/ro61k101ee59/7wJhKXlm6fIP6RRAYnnOS9/062a240a3bdd80eeb17923bf4f1fb0bf/10.png?w=2400&q=75)
This shift has made a massive change in the way customers see our feature. We stopped getting regular “thanks, but this is depressing” comments and instead saw a reduction in mortgage disconnection rate to 2.4%.
Apart from positively changing customer perception and reducing churn, we’ve also incorporated into the experience useful education about equity and loan-to-value (LTV).
Our overpayment calculator also benefited from fresh insights into the impact of overpayments on equity and LTV, which customers could take into action and maximise their chances of getting better rates on the next deal.
![Customer quote: It is very helpful for me in keeping track of my mortgage and equity and the impact of it on interest rates. It is also very helpful because it makes me understand the impact of overpaying your loan, how to stay on the lowest LTV. I have never understood it better until I have used Monzo. Thank you for such a wonderful app.](https://images.ctfassets.net/ro61k101ee59/5RZY4O93i2RLopATVnsFAK/9975c63ff026f63fc4100cab28642aab/11__1_.png?w=2400&q=75)
We would love to tell you now how we built the next exciting thing – home value and equity updates. But that might make this blog post impermissibly long. So perhaps we will stop here and leave it for another time!
Key takeaways
Do foundational research
We all know it’s essential to understand customer pain points. However, we might forget that it’s not just what people need but also how much they need it and whether it’s addressed anywhere else. Doing the foundational research at the beginning will allow you to move forward more confidently.
Play to your strengths
Understand your organisation’s unique strengths and weaknesses and prioritise the challenges your team is best placed to address. For example, an established company with a large customer base will (and should) tackle the same need differently than a scrappy start-up.
Set great goals to achieve great outcomes
With a new product, the right goals will help your team focus on having the most impact, ignore the noise, and keep stakeholders aligned. These goals can change over time as you learn more and the product matures.
Design for ease of use
You don’t always need to create something brand new. Sometimes, it’s right to innovate, and sometimes, it’s right to be the best version of what’s out there. Either way, focus on delightful and magically simple customer experience.
Structure your product iteration
Actively seek out customer feedback, validate your hypotheses with the data and be intentional about the impact you expect to see with each iteration.