It used to be that renting was cheaper than getting a mortgage. Times have changed. Demand for property means landlords have hiked their prices to near-mortgage levels, which means more people are looking at mortgages for the first time. They want to have a better handle on the security of their future finances, and have perhaps come to understand the benefits of homeownership in the UK. This is after all a country with a strong culture of homeownership.
Demand has increased because of the pandemic too, with attitudes and behaviours around how we live and work influencing a desire to better appreciate our four walls. And where we live has changed just as much, with location as much as price determining the property landscape. All of these factors, and more besides, have thrust the mortgage industry into the spotlight.
Unfortunately, the heat of the spotlight can frazzle as much as dazzle. While first-time buyers become accustomed to how the property market works, longstanding mortgage customers know how difficult and complicated it is to be “on the ladder”. This is one of the reasons cited for not switching to a better deal.
Streamlining the mortgage process
The UK’s Financial Conduct Authority (FCA) has recognised this state of affairs. Its research on mortgage switching, published in 2020, stated that there’s ”a case for intervening to help mortgage customers who do not switch”. Most customers don’t switch. That’s a big deal. It means most people end up staying on a rate that’s not suitable, or costs more than an alternative mortgage product.
This may sound like a perfect scenario for mortgage providers. People don’t leave? Great! Yet, resting on your laurels is never a good idea. A better idea is to improve relationships with your current customers while attracting new ones, which will inevitably keep costs down and everyone happy. While many people stick to their current provider, many don’t. They’re always on the lookout for a better deal somewhere else, and so they should. If mortgage providers focused on retention to prevent customer departures, the renewal (or product transfer) process could be streamlined. Again, this helps everyone.
Imagine a scenario whereby mortgage renewal time comes around, the customer is informed, is offered a range of options to choose from (with variable rates and offers), a self-serve portal in which to complete a transaction, and the deal is done. This is that frictionless scenario we’ve read about, where people see what’s in front of them and make better financial decisions. Banks and building societies reap the rewards of heightened customer engagement and loyalty. It’s not a myth. Others are doing it.
By circumnavigating the many cumbersome systems at play in a typical retention process, you reduce friction. Customers stick around and stop looking elsewhere. It really is that simple. Getting bogged down in the administration of siloed systems is not only a waste of time and effort, it’s costly and risky (from a compliance perspective).
People are willing to embrace self-serve portals, so our advice is to serve them up. Customers want to review, compare, and select (or renew) their mortgage product without the need for time-consuming paperwork, branch visits, or phone calls. In turn, the average UK mortgage provider will save money against the cost of acquiring new customers, as well as increase profitability. The era for everybody to get better at switching is upon us.