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Lenders struggling to monitor retention rates

  • 21/05/2002
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Using mortgage retention figures to measure lending performance can be difficult for lenders, accord...

Using mortgage retention figures to measure lending performance can be difficult for lenders, according to accountant KPMG.

Speaking at the recent Building Societies Association conference, Richard Gabbertas, a partner in the financial services practice at KPMG, said two ways lenders can monitor performance are through mortgage rates and mortgage retention.

‘It can be difficult to measure performance especially in some of the more difficult areas such as mortgage retention. Over time, mortgage retention is a strong indicator of sector performance as a whole,’ he said.

One point raised by a delegate addressed the need for more help with performance-measuring indicators. He said the problem is not about indicators themselves, but how to measure them ‘ especially on old databases.

Britannia Building Society has recently addressed this issue by setting up a scheme to measure performance through mortgage retention.

Graham Leftwich, corporate communications manager at Britannia, said: ‘We have recently set up a pilot scheme to proactively approach people whose special-offer period is coming to an end.’

In terms of measuring retention, Leftwich said it is a relatively simple process completed by Britannia’s own in-house database. The costs of holding on to an existing customer can be a lot less than generating new business.

‘It is cheaper to keep a customer than to attract a new one. You know how much it costs to advertise. If you divide this cost by the new mortgages you sell, that is how much it costs to attract a new customer. These costs do not exist with an existing customer,’ he said.

Gabbertas added: ‘Measuring the performance of the sector used to be about profits ‘ but not any more. Measuring performance should not be just about rates. We need to balance cost and service.’

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