There is growing evidence that the remortgage market is performing admirably, but it’s also fair to say that consumers and, more importantly intermediaries, are still not fully grasping the opportunities on offer.
This market is being held back by a ‘wait and see’ attitude and this is not only via those mortgage holders sitting on their SVR.
Some intermediaries are also holding back and not targeting such clientele and this is an attitude that must change in order to really maximise the fantastic opportunities currently available in this market.
Waiting until an actual rise in interest rates may be the trigger for many mortgage holders, but we all know that by the time this happens the best rates will have already risen. We also know that an interest rate will happen.
Barclays suggests that it will be sometime in quarter three 2011, so the question is why wait and see when such hugely competitive deals are currently available?
Yes, some mortgage holders may want to squeeze out a couple more months on a low SVR, but will saving a few pounds now stack up against moving onto a two- or three-year deal with an inflated rate after the horse has bolted?
I think the answer to that is pretty obvious.
The time is nigh for intermediaries to be even more proactive within the remortgage market. This is especially apparent when hearing some of the following data.
Research by the UK Mortgage Council shows that 41% of people on the lookout for a mortgage in the next 12 months would definitely look for a new deal, if their monthly payments rose by £100.
In contrast, just one in ten would definitely look for a new deal if there was an interest rate rise of 1%.
This works to underline that, whilst consumers are clearly anticipating some rise in interest rates, it is apparent that many do not realise, or have been advised upon, the real monetary impact on their repayment levels.
In other startling findings, the research adds that more than a third of mortgage holders with no current plans to be active in the next 12 months did not even know what their current interest rate is.
Additionally, 40% of respondents indicated a desire to be active in the mortgage market in the next 12 months with almost half of these hoping to remortgage. It also stated that the number hoping to remortgage in the next 12 months increased by 5% in Q1 2011, with many citing a desire to decrease monthly payments and to benefit from lower interest rates.
Barclays’ research also suggests that there are still hundreds of thousands of mortgage holders sitting on a lender’s SVR who could benefit from switching to another product.
All these stats help illustrate the demand, but let’s outline just who a remortgage client is and how intermediaries can meet their needs.
Putting it into the most simplistic terms, they are:
- Mortgage holders sitting on an SVR rate.
- Mortgage holders with an LTV of between 65% and 80%.
- Mortgage holders with larger loan sizes that will suffer the greatest payment shock (although even mortgage holders with smaller outstanding loan amounts could still benefit).
- Mortgage holders about to come off fixed rate deals.
And the top three motivations for remortgaging?
- Getting a better deal
- Saving money
- Taking financial control
It’s obvious that a prime target for a remortgage deal is one that doesn’t fully realise how much they could save in monetary terms by simply remortgaging.
Presenting them with pounds and pence figures in terms of potential savings that could be made and the potential payment shock they may face as a result of rises in interest rate levels could really help the remortgaging message hit home
A firm’s client database might be sophisticated or simple, but as a minimum it will:
- know which clients are sitting on the SVR fence
- know which clients are soon to come off longer-term fixed rates
Utilise this information and start by targeting the mortgage holders with larger outstanding loans first – maybe £250,000 and over – to really show them how they may be able to get a better deal, save money and take greater financial control.
Communication is key
The key to translating new and existing clients into remortgage sales is an extensive knowledge of the market in addition to good selling, marketing and communication skills.
Selling
- Speak their language – make sure that selling technique tap into the clients primary motivations and let them know in no uncertain terms what’s in it for them
- Act local – speak to local companies to see if they have a relationship with an intermediary firm or financial adviser. Offer firms and their employees some kind of incentive if they place business through you, especially for remortgage business
- Make the most of each opportunity – set some expectations of what an additional cross selling ratio should be
Marketing
Marketing doesn’t have to be expensive. Things such as great headline rates, statistical data, deals with no fees, exclusive products or interest rate speculation are all valuable marketing tools.
- Set objectives – be ambitious but realistic. Think and plan carefully before embarking upon any particular campaign and define a budget.
- Don’t treat customers equally -target and identify the right audience and tailor a campaign/strategy accordingly, keep it simple as one effective message a week is more than enough and be compliant.
- Evaluate, evaluate, evaluate – measure success, or lack of, on a regular basis and importantly be honest when analysing the data. If something works do it again but don’t be afraid to try new measures and concepts.
Remembering to implement the simple things can often prove invaluable to maximising sales opportunities. It is often the simplest, clearest messages that can have the greatest impact.
The reason to wait and see when it comes to utilising databases and attracting new clients for remortgage business are quickly running out.
The fact is, if you don’t act now, you can be sure your competitors will.
