Customer Acquisition and Retention Strategies in the UK Mortgage

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Customer Acquisition and Retention Strategies in the UK Mortgage Market
Description: Churn remains a crucial issue in the UK mortgage market, affecting lenders business in varying degrees. Understanding the behavior of the remortgaging customer and the factors influencing the customer buying decision is essential for lenders to design successful acquisition and retention strategies. Scope of this title: - Uses Ipsos MORI data to understand the needs and requirements of mortgage customers. - Provides examples of lenders acquisition and retention strategies. Highlights of this title: - 54.2 per cent of remortgagors having switched lender did so when coming off a short-term fixed rate mortgage product or a discounted product. - Nearly a quarter of participants (24.6 per cent up from 23.3 per cent in 2003) stated advice from professionals among the factors which influenced them in choosing their current mortgage product. This is understandable given that the importance of the intermediary channel has increased significantly over the years. - Given the utmost importance of interest rate, a number of mortgage lenders now offer customers the possibility of lowering the interest rate on the chosen mortgage product by paying higher fees up-front. Reasons to order your copy: - Gain access to consumer data to understand the switching behavior of mortgage customers. - Learn the importance of the various factors influencing the customer buying decision. - Learn what your competitors are doing to address customers needs and requirements and curb churn.

Contents:

OUR VIEW 1 CATALYST 1 SUMMARY 1 METHODOLOGY 1 ANALYSIS 2 Remortgaging has become a common feature of the UK mortgage market 2 An increasing number of mortgage customers are remortgaging more than once 2 Those aged between 30 and 44 are more likely to remortgage 3 More than 60 per cent of those with an annual household income exceeding £50,000 have remortgaged in the past five years 4 More than a quarter of customers who have remortgaged have changed lender 5 More than 50 per cent of those who have changed lender have done so at the end of a discounted and/or short-term fixed rate product 6 Lenders have started to adopt a pro-active approach with regards to their existing mortgage customers 8 Moreover, lenders are designing more flexible mortgage products in order to curb existing customers from churning 9 It would seem that lenders strategies to retain remortgaging customers is currently impacting on the remortgage market 9 The high level of churn in the UK mortgage market means that some lenders customer bases are being more affected than others 9 A higher proportion of surveyed mortgage customers mentioned Halifax as their previous lender rather than their current lender 9 Understanding the major factors influencing the customer buying decision plays a crucial role in designing successful acquisition and retention strategies 11 69.1 per cent of mortgage customers contacted at least one lender other than their current lender when they arranged their last mortgage 11

So, what are the major factors influencing the customers purchase decision? 13 Price remains the most mentioned influential factor when choosing a mortgage for the population as a whole 14 Unsurprisingly, a significant proportion of customers chose their current mortgage product based on the advice received from professionals 17 11.3 per cent of participants stated that being an existing customer influenced them in choosing their current mortgage product 19 10.0 per cent of responses were accounted for by the fact that the lender was prepared to lend the amount applied by the borrower 21 The degree of importance of the factors influencing the mortgage customers purchase decision varies by age group and income band 21 Promotional campaigns are now part of a few mortgage lenders strategies to acquire customers 24 Nationwide is running a competition for customers completing a full mortgage application online 24 APPENDIX 25 Supplementary data 25 Definitions 28 CAGR 28 Gross advances 28 Mortgage intermediary 28 Non-standard and sub-prime 28 Remortgaging 28 Research methodology 28 Ipsos MORI consumer survey 28 Further reading 28 European mortgage reports 28 UK mortgage reports 29 UK mortgage briefings 29 Forthcoming mortgage briefings 30 Our custom research capabilities 30 Ask the analyst List of Tables Table 1: 2-year fixed rate mortgage products offered by a sample of mortgage lenders, October 2006 7 Table 2: Percentage points difference between responses for current lender and previous lender, March 2006 11 Table 3: Top five mortgage lenders contacted by respondents other than the lender they are currently using, March 2006 12 Table 4: How many times, if at all, have you changed your mortgage lender or renegotiated your mortgage with the same lender in the last five years? 2003 and 2006 25 Table 5: How many times, if at all, have you changed your mortgage lender or renegotiated your mortgage with the same lender in the last five years?, split by age group, 2006 25 Table 6: How many times, if at all, have you changed your mortgage lender or renegotiated your mortgage with the same lender in the last five years?, split by income group, 2006 26 Table 7: Since you purchased your current property, have you changed your mortgage in any of these ways without actually moving?, March 2006 26 Table 8: When you changed your mortgage lender, did you change when either a discount period on the interest rate or a fixed rate period on the mortgage ran out?, March 2006 26 Table 9: Can you tell me which of the following factors initially influenced you in choosing your current mortgage? 2003 and 2006 List of Figures Figure 1: An increasing proportion of mortgage customers have remortgaged more than once in the last three years, 2003 and 2006 3 Figure 2: The 30 to 44 year old age group is more likely to remortgage than other age group, March 2006 4 Figure 3: Those with a higher annual household income have a higher tendency to remortgage than those with a lower income, March 2006 5 Figure 4: 26.4 per cent of customers who have remortgaged in the last five years have changed lender, March 2006 6 Figure 5: More than half of those who have switched lender have done so when either a discount period on the interest rate or a fixed rate period on the mortgage has run out, March 2006 7 Figure 6: Halifax was the most mentioned lender when participants were asked about the identity of their previous lender, 2006 10 Figure 7: Alliance & Leicester appeared twice in Moneyfacts best-buy table for discounted variable

mortgage products for first-time buyers in October 2006 13 Figure 8: The importance of "interest rates" and "advice from professionals" has increased between 2003 and 2006 14 Figure 9: Lenders offering higher than average market rate still aim at offering a rate which is only marginally higher than the market rate, September 2006 15 Figure 10: Nationwides online remortgaging calculator allows customers to work out how much they can save by switching to Nationwide, November 2006 16 Figure 11: HSBC offers its customers the possibility of tailoring their prices 17 Figure 12: GMAC-RFC provides intermediaries with a comprehensive guide to its POS system, 2006 19 Figure 13: Barclays is cross-selling mortgages to its online banking customers, 2006 20 Figure 14: Top five factors influencing choice of current lender by age group, March 2006 22 Figure 15: Top five factors influencing choice of current lender by income group, March 2006 23 Figure 16: Nationwide is using promotional tactics to attract mortgage customers, November 2006 24 Figure 17: Our core consulting capabilities 31

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