Abstract
Overview
Introduction
Lenders have depended upon short-term pricing models over the last few years
as they have concentrated on customer acquisition. However, such models have
meant that lenders are continuing to suffer from diminishing margins. As a
result, lenders are taking a new interest in retention, which is being
reflected in a change to pricing models. But to what extent will the market
change?
Scope
- Discusses the key pricing models currently used by lenders in the market.
- Gives insight into how the market is changing and which lenders are
changing their pricing strategies.
- Provides an understanding of the challenges lenders face in regards to
pricing.
- Incorporates primary interviews from industry experts and secondary data
from a wide range of sources.
Report Highlights
The majority of lenders continue to use short-term pricing to acquire
customers. Offering low headline rates has led to low margins. To recoup these
costs, lenders have continued to raise arrangement and exit fees, which have
brought about regulatory and media concern.
Lenders are turning to tracker products in order to support retention. Indeed,
more lenders are moving away from SVRs by reverting to a tracker rate after a
product' s discount rate period ends. In fact, Alliance & Leicester now has a
higher proportion of its lending in tracker related products than in SVR
related products.
Long-term fixed rate mortgages have also seen a rise in popularity. Indeed, a
number of lenders started offering such deals in 2006, including Woolwich, the
Skipton Building Society, First Direct, and Stroud & Swindon BS.
Reasons to Purchase
- Identify the pricing strategies that are being successful, both in the
short and long-term.
- Gain an understanding of how the market is changing and what this means
for lenders.
- In-depth analysis of a number of pricing issues and how lenders are
reacting.
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