Many lenders are considering what to do with borrowers coming to the end of very low fixed-rate deals. A lot of these will have been introduced by intermediaries who believe that the borrower is their customer, but some lenders will also be keen to offer a seamless direct-to-consumer process for retaining the borrower on a new reasonable margin deal themselves.
The retention process has always been a conundrum for lenders; in the mid 1990s Cheltenham & Gloucester (C&G) made the bold step of referring advice to local IFA communities around their branches. At that time they did not pay procuration fees, but still managed to receive around 60% of their business from intermediaries.
C&G had retention products they offered to borrowers directly, but the strength of the local relationships between C&G branches and their intermediaries was such that this did not cause any significant issues; intermediaries generally knew when products were up for renewal and had already sorted the remortgage on a new C&G product by then.
Fundamentally, the retention process has not changed, but today in a highly intermediated marketplace, lenders are beginning to realise that it potentially makes sense to pay proc fees on product switching as well as new business. However, in a highly competitive marketplace why would an intermediary not look at the whole market rather than just place the business straight back to source, especially when MMR requirements mean that the customer must always receive best advice?
The use of technology could become a critical factor. The move towards omni-channel platforms means that channel switching can be accommodated more easily from intermediary to direct-to-consumer, while improved use of web and digital technologies allows both borrowers and intermediaries to track when someone is coming to the end of their mortgage term and engage more easily. Now borrowers can also receive product marketing via social media, it means everyone in the process can have instant information and know what is being offered.
Technology is undoubtedly going to improve communication and ease of remortgaging. Both intermediaries and borrowers are increasingly of a generation that encompass quick, accurate information and expect streamlined, automated processes. The retention process for lenders should particularly be geared towards these principles, but time will tell as to whether this will make it easier for direct retention rather than always involving the originating intermediary.
