Pay attention to retention

2023 is a huge year for remortgage activity, with data from UK Finance revealing that nearly 1.8 million fixed-rate mortgage customers will see their product expire this year. With this in mind, now is the perfect time for lenders to consider their existing customer retention strategies to make the most of this opportunity to add value and stay connected with their customer base.  

For lenders, having a strong plan to retain customers is vital. Focussing on this area will not only help to build a steady stream of repeat business, but also reduce the cost of acquiring new customers further down the line. To make this process easier, lenders can now use technology to create a digital retention strategy that will keep clients on their books for longer while removing some of the admin costs of doing so manually.  

Break out - how to free mortgage prisoners

Alongside the benefits for lenders, a digital retention strategy offers advantages for borrowers too, and especially for 'mortgage prisoners’. In simple terms, a mortgage prisoner is a borrower locked into a product with a high interest rate, but who cannot secure a better deal because of strict affordability criteria. This issue is addressed in the new Consumer Duty regulation, which emphasises the responsibility of lenders to protect vulnerable customers.  

Lenders are best placed to help this group, as they can offer their clients a wide array of affordable and realistic options. With a product switch, for example, customers can change their current mortgage product to a new one with the same lender when their deal is coming to an end. A simple product switch function can streamline this process and encourage borrowers to stick with the same lender rather than look elsewhere for competing deals.  

This isn’t always possible (when using certain specialist lenders, for example), but for lenders that can provide this service, offering it digitally can help to streamline the process significantly. After all, in cases where a manual product switch fails, clients are often pushed back through the underwriting and evaluation phases. This is exactly the type of scenario that a digital product switch has been designed to avoid.  

In today’s economic climate, when securing the best rates often requires borrowers and brokers to move quickly before they’re withdrawn, it is paramount that lenders convey the advantages of this seamless approach to switching products, including increased efficiency, less paperwork, and reduced fees. All these elements, supported by modern tech solutions, can greatly improve customer retention.

Work smarter, not harder 

There is a lot of new software coming to market this year for lenders looking to launch – or enhance – their digital retention strategy. These tools can quickly analyse records of existing customers, pinpoint exactly who is coming to the end of their fixed term and identify who is eligible to transfer to a new product. Armed with this information, lenders can contact their customers to discuss the options available to them and explain how to begin the process.  

Of course, lenders must keep in mind that the majority of this activity is driven by brokers. Making their lives easier not only helps the end customer, but also strengthens the lender’s relationship with the broker themselves.. Lenders that offer attractive product switch options will build positive relationships with brokers, who will then recommend that option to satisfied customers again and again. As a result, brokers will advise their clients to stay with their current lender, once again boosting customer retention.

This isn’t a case of ‘one size fits all’, however. In many cases, lenders will have an ‘execution only’ option available, meaning that customers can switch products without the need to consult a broker. This approach may very well suit some customers, but given the new Consumer Duty guidance, it’s important that lenders make sure that customers can access their products through whichever route they prefer.

With interest rates rising, the ongoing cost of living crisis, and wider macroeconomic factors constantly changing, lenders need the tools to deliver the products that suit their customers best. For example, finova’s Core Banking Platform, Apprivo², has recently been optimised to facilitate a complete product switch journey. The solution puts the borrower in control, allowing them to switch their product effortlessly, whenever they choose. This quality of service is vital for customer satisfaction, which helps to ensure high levels of retention when the time comes. 

When it comes to retaining customers, product switch is often the best option in a lender’s toolbox for delivering satisfactory outcomes and keeping a borrower on their books. Naturally, manual processes create more work for lenders and frustration for customers, making a streamlined tech solution the most viable choice for this fast-moving market.