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Cream of the lending crop

Lending Strategy’s new Lending Excellence Awards provide a way for lenders to benchmark themselves while providing consumers with valuable guidance, says John Murray.

The One account and Nationwide have struck Platinum in Lending Strategy’s new Lending Excellence Awards which, based on a national consumer survey, have a dual role – to provide a snapshot of service standards across the country and to act as a signpost for home buyers who are shopping around for mortgages.

The research behind Lending Strategy’s awards for mortgage lenders, with the public determining the winners, has thrown up some surprising findings. But the people behind the awards – which are known as LEX – argue that those surprises underline the credibility of the accolades which will offer a signpost to mortgage shoppers based on a wider remit than product alone.

One of the surprises is that 28% of respondents to the survey stated that they felt pressured into buying an ancillary insurance product with their mortgage.

Another is the reported slowness of some lenders in complying with the statutory regulation regime introduced by the Financial Services Authority two years ago.

But on the positive side, the market research on which the awards are based provides a snapshot of the industry that goes beyond the mystery shopping exercises of the FSA and consumer pressure groups.

This gives a truer picture of what is happening and indicates to lenders in which direction they must move to improve their standing when it comes to treating customers fairly and differentiating themselves from competitors.

With 7,800 respondents, these awards introduce measurable standards by which lenders can benchmark themselves.

The Lending Excellence Awards are the outcome of a collaboration between research consultancy Capital Blue and Lending Strategy, which was launched in February this year to add value to corporate thinking among lenders.

“The mortgage application process is a defining experience for customers,” says Capital Blue. “It sets the standard against which they establish their opinion of a mortgage provider. New customers can find the process confusing. Many struggle with the concern that they have made a sensible purchase and become anxious as they take on the largest financial commitment of their lives.

“Lenders that ease this process by ensuring customers are treated well at this point are more likely to establish long-term customer loyalty.”

The survey measures customers’ opinions of their mortgage provider by asking them to define their expectations of service in key areas of the process and to comment on their experience. Features of this research include:

l A consistent evaluation of customer expectation and experience of mortgage origination services.

l A customer rating of the relative importance of service features (documentation, communication, process speed, transparency) during the processl An assessment of individual lender performance.

l A lender ‘ranking’ taking account of customer preference and experience.

l Measurement of a customer’s overall satisfaction with a lender.

TThe survey that informs the Lending Excellence AwardsThe national survey by Capital Blue examines the successes and failings of the UK lending market from a customer’s perspective. It measures how customers are treated and, as importantly, how they expect to be treated. It identifies the lenders that customers perceive as providing outstanding service and names those that fall short of expectations.

To sell the promise of exceptional customer service requires an excellent marketing team. To deliver on that promise demands an orchestrated focus by all members of the organisation.

Until the research undertaken by Capital Blue there was no customer-focussed measure of how well lenders deliver against their service mantras.

The mortgage application process is a defining experience for customers. It sets the standard against which they establish their opinion of a mortgage provider.

Capital Blue’s survey measures customers’ opinions of their mortgage provider by asking respondents to define their expectations of service in a number of key areas of the process, and to comment on their experience in reality.

The survey included borrowers who reported that their mortgages completed after May 1 2004. The 7,800 eligible respondents provided a unique overview of the market. They also allowed an assessment of the impact of the changes introduced on Mortgage Day in 2004.

Also investigated were customers’ primary requirements for mortgage finance, the amount of their mortgage loans and the valuations of properties at the time of purchase.

A sample of research findings shows:

l Just under 50% of respondents would ‘never’ or ‘possibly’ recommend their lender to others.

l 10% waited longer than five minutes to receive an answer to a telephone call to their lender.

l Almost 20% were not contacted by their lender between submission of their application form and completion of the loan.

l Most lenders still ignore email, text and online communications as ways of updating customers.

l More than 50% of respondents who completed their mortgage after Mortgage Day did not receive a Key Facts Illustration prior to submission.

l Some 11% of respondents expected lender documentation to be difficult or impossible to understand.

l Over 40% of people who completed their mortgages after Mortgage Day were not made aware of fees and charges before their mortgage application was submitted.

It is apparent from this research that a number of lenders have grasped the customer service nettle. The expectations of their customers are significantly higher than the norm. This minority group of lenders, both large and small, combine excellent results with great service.

But others lack the drive or the desire to please their customers. This can lead to problems within an organisation including an adverse effect on staff morale, reduced profit arising from process duplication and loss of business due to poor word of mouth.

There could also be further repercussions on an industry-wide basis, particularly as mortgage lending is frequently the subject of media and regulatory scrutiny.

Areas lenders need to address

The Capital Blue survey highlights a number of areas that lenders should address as they strive to improve their relationships with existing borrowers and attract new customers. These include:

l Customers do not value all services equally. Lenders looking to change their reputation should focus on key customer areas.

l Customer service is a major differentiator in a market where margins are tight and competition fierce.

l The recent FSA initiative to improve consumer information prior to mortgage purchase has had little effect.

l KFIs have failed to ensure timely communication of the core elements of mortgage products to customers.

l Customers remain confused about products and often commit to a purchase without the full facts.

l Many customers are not informed about charges prior to financial commitment. This is rare in almost any other consumer sector.

l Customers’ experiences consistently fall below their expectations.

For further information contact Capital Blue at enquiry@capitalblueltd.comLEX Platinum Awards

High street lender: Nationwide

Best specialist lender: The One account

Specialist in this context describes the channel to market rather than the type of mortgage on offer. The One account has not only won the Platinum Award but all four Gold Awards in the sub-categories covering process speed, communication, documentation and transparency. It has swept the board and is streets ahead of the competition to the extent that 92% of respondents said that they’d use the same mortgage lender again.

Nationwide’s success provides the society with a consumer endorsement of its role as a champion of consumer causes which have covered ATM and credit card charges and opening up new mortgage offers to its existing customers as well as new borrowers.

As a high street lender it didn’t sweep the board like The One account did in the sub-categories covering process speed, communication, documentation, and transparency. These were shared among two mutual lenders that achieved Gold Standard and HSBC. But as Capital Blue points out, Nationwide performed solidly in all those areas and is without question the star performer when it comes to customer service in the high street.

LEX Gold Awards

There are six winners in this category which, with the exception of Intelligent Finance, is dominated by mutuals including Co-operative Bank.

This is proof that big is not always best when it comes to service. Equally significantly, it is this group that shares three of the four sub-category awards for high street lenders with the Yorkshire winning both the process speed and transparency categories and Co-operative Bank winning the documentation category.

The LEX Gold Award winners are:- Co-operative Bank- Coventry- Intelligent Finance- Leeds- Portman- The Yorkshire

LEX Silver Awards

There are four winners in this category but with Alliance & Leicester, Cheltenham & Gloucester, Skipton and Standard Life Bank sharing the honours it is not dominated in the same way as the Gold Awards are by building societies.

LEX Bronze Awards

There are two winners in this category, Royal Bank of Scotland and Mortgage Express. MEX’s success is interesting in that it is the only true specialist lender to make the accolades. Bearing in mind that service could be a key differentiator in this market one would have expected a bigger presence of specialist lenders but that might change next year.

The LEX Category Golds

These are for process speed, communication, documentation and transparency and there are eight awards in this category.

The One account won golds for all four areas while in the high street category the spoils have been divided between three lenders. These are:

Communication: HSBC

Documentation: Co-operate Bank

Process speed: The Yorkshire

Transparency: The Yorkshire

The 2006/07 winners

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