Customer Acquisition and Retention Strategies in the UK Mortgage Market

Table of Contents

• VIEW
  • CATALYST
  • SUMMARY
  • METHODOLOGY
• ANALYSIS
  • Remortgaging has become a common feature of the UK mortgage market
    • An increasing number of mortgage customers are remortgaging more than once
      • Those aged between 30 and 44 are more likely to remortgage
      • More than 60 per cent of those with an annual household income exceeding £50,000 have remortgaged in the past five years
    • More than a quarter of customers who have remortgaged have changed lender
      • 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
      • Lenders have started to adopt a pro-active approach with regards to their existing mortgage customers
      • Moreover, lenders are designing more flexible mortgage products in order to curb existing customers from churning
      • It would seem that lenders' strategies to retain remortgaging customers is currently impacting on the remortgage market
  • The high level of churn in the UK mortgage market means that some lenders' customer bases are being more affected than others
    • A higher proportion of surveyed mortgage customers mentioned Halifax as their previous lender rather than their current lender
  • Understanding the major factors influencing the customer buying decision plays a crucial role in designing successful acquisition and retention strategies
    • 69.1 per cent of mortgage customers contacted at least one lender other than their current lender when they arranged their last mortgage
    • So, what are the major factors influencing the customer' s purchase decision?
      • Price remains the most mentioned influential factor when choosing a mortgage for the population as a whole
      • Unsurprisingly, a significant proportion of customers chose their current mortgage product based on the advice received from professionals
      • 11.3 per cent of participants stated that being an existing customer influenced them in choosing their current mortgage product
      • 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
    • The degree of importance of the factors influencing the mortgage customer' s purchase decision varies by age group and income band
  • Promotional campaigns are now part of a few mortgage lenders' strategies to acquire customers
    • Nationwide is running a competition for customers completing a full mortgage application online
• APPENDIX
  • Supplementary data
  • Definitions
    • CAGR
    • Gross advances
    • Mortgage intermediary
    • Non-standard and sub-prime
    • Remortgaging
  • Research methodology
    • Ipsos MORI consumer survey
  • Further reading
    • European mortgage reports
    • UK mortgage reports
    • UK mortgage briefings
    • Forthcoming mortgage briefings
  • Ask the analyst
  • List of Tables
    • Table 1: 2-year fixed rate mortgage products offered by a sample of mortgage lenders, October 2006
    • Table 2: Percentage points difference between responses for current lender and previous lender, March 2006
    • Table 3: Top five mortgage lenders contacted by respondents other than the lender they are currently using, March 2006
    • 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
    • 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
    • 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
    • Table 7: Since you purchased your current property, have you changed your mortgage in any of these ways without actually moving?, March 2006
    • 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
    • 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
    • Figure 2: The 30 to 44 year old age group is more likely to remortgage than other age group, March 2006
    • Figure 3: Those with a higher annual household income have a higher tendency to remortgage than those with a lower income, March 2006
    • Figure 4: 26.4 per cent of customers who have remortgaged in the last five years have changed lender, March 2006
    • 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
    • Figure 6: Halifax was the most mentioned lender when participants were asked about the identity of their previous lender, 2006
    • Figure 7: Alliance & Leicester appeared twice in Moneyfacts best-buy table for discounted variable mortgage products for first-time buyers in October 2006
    • Figure 8: The importance of "interest rates" and "advice from professionals" has increased between 2003 and 2006
    • 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
    • Figure 10: Nationwide' s online remortgaging calculator allows customers to work out how much they can save by switching to Nationwide, November 2006
    • Figure 11: HSBC offers its customers the possibility of tailoring their prices
    • Figure 12: GMAC-RFC provides intermediaries with a comprehensive guide to its POS system, 2006
    • Figure 13: Barclays is cross-selling mortgages to its online banking customers, 2006
    • Figure 14: Top five factors influencing choice of current lender by age group, March 2006
    • Figure 15: Top five factors influencing choice of current lender by income group, March 2006
    • Figure 16: Nationwide is using promotional tactics to attract mortgage customers, November 2006
    • Figure 17: Datamonitor' s core consulting capabilities