Speaking at the British Mortgage and Protection Senate (BMPS) last week, the firm told lenders to look beyond originations and think about the wider mortgage journey.
It said the majority of customer engagement happened after a mortgage was sold, meaning customer-centric servicing was important in driving loyalty, retention and long-term profitability.
Target Group said that with acquisition costs sometimes up to five times higher than retention costs, just a 5% rise in customer retention could boost profits by more than a quarter.
It said lenders that focused just on origination and not engaging with customers through the lifecycle could result in missed revenue.
Melanie Spencer (pictured), growth director at Target Group, said: “With lending targets to hit and tough competition, there’s no question that customer acquisition remains absolutely critical. But lenders must also consider what happens when the ink is dry and the keys are handed over. We have to challenge the mindset that the mortgage journey ends at origination. There is massive untapped potential in mortgage servicing to drive customer retention and profitable growth.
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“With high mortgage maturity and high churn, it’s a clear wake-up call for the mortgage market. It requires lenders to rethink their post-origination strategies – moving away from just statements and arrears and focusing on building relationships, earning trust and delivering long-term value. Today, smart servicing leverages emerging technologies to transform the experience into something that is proactive, personal and ultimately profitable.
“To keep seeing servicing as a cost centre is a huge mistake and one that, if not corrected, will leave lenders lagging behind the competition.”
Target Group said this meant lenders should focus on a customer’s lifetime value instead of the loan value and consider the full relationship.
It said lenders should transition to a technology-enabled, human-led approach to servicing to improve efficiency while still prioritising people.
