A focus on customer retention in the mortgage market

30 September 2014

Against the backdrop of an increasingly competitive marketplace and a digital age where customers are both savvy and empowered by price comparison websites, it has never been more important to focus on customer retention.

The current mortgage landscape

The UK economy continues to perform strongly and consumer confidence has also risen steadily since the turn of the year, with the latest figures reporting a 13 point increase since January 2014. This is reflected in the mortgage industry with recent figures from the Council of Mortgage Lenders highlighting an increase in market demand.
According to the Bank of England, total gross lending in June grew by 6 per cent on the month to £17.9 billion (20 per cent up on June last year). There were 28,600 first-time buyer mortgages in June, which is 7 per cent more than in May, and 19 per cent up on June 2013. In June, the number of mortgages to movers was also up reaching 31,900, an 11 per cent increase on June last year.

The mortgage origination process needs to be slick and efficient to make the most of this greater market demand.

MMR has placed a requirement on lenders to implement a more comprehensive sales process, meaning potential customers need to be guided through a longer series of steps before they can get a mortgage approved. As a result, if the right foundations are not in place to make the advice process efficient, securing new customers can be more challenging.
Throughout the mortgage origination process there are a number of stages where potential customers could choose not to continue. For example, if the information available on a provider’s website is not clear and simple, this could result in someone choosing another lender. Similarly, if the process of delivering advice seems cumbersome and time consuming, the potential customer could choose to go elsewhere for advice.

Ensuring as many prospective customers as possible make the journey from initial enquiry through to release of funds is paramount, and as a result, a positive customer experience is extremely important. This can be achieved by using technology to simplify the mortgage origination stages. For example, the advice process can be streamlined by automating steps and documenting the advice electronically in cases where it is necessary to demonstrate regulatory compliance.

Customer retention – a focus on experience

Due to the time consuming nature of securing new customers, it has never been more important to retain the customers you have. It is much simpler to keep existing customers than to attract new ones. If possible, customers want to avoid the lengthy advice process and uncertainty that comes with moving to a new provider.

However, in a digital world, ‘shopping around’ has become the norm and there are a number of points in a mortgage’s life span where customers may feel compelled to assess the market for competitive offers. For example, when introductory fixed term interest rates come to an end, customers may choose to consider whether better value could be achieved by switching mortgage providers.

In addition, in his opening remarks at the May Inflation Report, Mark Carney stated that ‘the economy has edged closer to the point at which the Bank Rate will need gradually to rise.’ There has been much speculation as to when this day will come. When it does, customer retention will become more important than ever as customers will almost certainly take the opportunity to ‘shop around’ for better deals.

To assist with customer retention it is extremely important to stay in touch with your customers and to take steps to understand their individual needs. Lenders must use this knowledge to offer incentives to stay at key points in a mortgage’s life span. For example, if a mortgage’s fixed term interest rate is coming to an end, it is important to recommend the best deals for individual customer needs to give them a reason to stay at the earliest possible stage.
Mortgage administration platforms that manage the day-to-day transactions and maintenance on mortgage accounts can help lenders to offer an improved customer experience. Processes are in place for many tasks such as direct debit amendments, arrangement updates, payment conversions and term extensions, supporting advisers in delivering a seamless and positive service.

In addition, all updates to a mortgage can be logged for audit purposes and applied in real time, allowing efficient handling of customer calls and first call resolutions. An online history of all changes is also maintained to support the handling of customer queries.

Due to the widespread use of mobile banking and smart technology, customers are more empowered to take control of their own finances. Consequently, mortgage administration platforms have been developed to allow a number of self service functions such as the ability to view information including current balances, interest rates and direct debit dates. Customers can also request a statement, change bank and direct debit details and send a secure message to the lender. This level of customer involvement supports retention as customers become more reliant on and bought into the service.
To summarise, the mortgage market is looking up, with greater appetite for new mortgages and in turn an increased requirement on lenders to deliver efficient mortgage advice to secure business. However, as interest rates look set to rise and digital customers can ‘shop around’ with ease, customer retention should be a priority. Technology combined with detailed knowledge of customer needs can lead to an improved customer experience, and in turn increase their loyalty and commitment to the lender.