Lender analysis can lead to more product options

28 June 2010

Launching a product range exclusively for couples is the first stage in our commitment to offer tailored deals.

When we recently launched a range of two-year fixed rates exclusively for couples we didn’t simply pluck the idea out of thin air or base it on conjecture.

We developed the products because our research highlighted an opportunity.

On poring over the performance of our back book one of the things that stood out was that we had fewer problems on joint mortgages than those for single borrowers.

There was enough of a difference for us to understand that joint applications present a lower lending risk, so we believe such borrowers should benefit from lower rates.

That’s why our new deals offer couples a better rate than single applicants, with two-year fixes starting from just 2.99%. We are currently testing this range with a selection of brokers and networks to gauge demand.

It’s part of our emphasis on using our underwriting and product development expertise to come up with innovative products.

We plan to launch more tailored deals using this approach, backed up by analysis of demand and risk.

We found we had fewer problems with our joint mortgages than with those for single borrowers

The concept of tailored deals for specific consumers is common in other areas of financial services.

For example, in the insurance market underwriting is often targeted at clients with specific circumstances, whether it’s auto cover for the over-50s or life insurance for smokers.

There are lessons that can be learnt from such bespoke products targeted at groups that share a similar risk profile.

The prime mortgage market is not homogenous and within it lie pockets of borrowers with differing needs and representing differing lending risks.

We want to develop more products for these sectors based on a greater understanding of the information we hold.

But it’s not just about analysing our own book - it’s also important to analyse the market.

For example, we recently launched a four-year fixed rate because we found that many consumers are confused about whether to lock in for the short or longer term.

Our product provides an alternative and our discussions with brokers show us they want more options like this.

We have built up a reputation as a lender that supports brokers and believe this approach to product design that embraces innovation and creativity will help brokers to source mortgages that more closely match their clients’ circumstances.

The market has been woefully lacking in innovation in the past few years as its focus has understandably been elsewhere.

Now is the time to generate more options for brokers and their clients.

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