Competition is hotting up to keep clients and generate more referrals
Competition to retain customers is projected to ramp up in 2019 in anticipation of a potential decline in the number of new mortgage customers entering the market.
The cost of retaining customers is also said to be significantly less than securing new borrowers for brokers and lenders, and with many purchases on hold, retention has become an increasingly appealing market.
Twenty7Tec chief executive James Tucker says: “In an increasingly competitive environment, the cost of acquisition of new clients for both brokers and lenders is rising, and retention of existing clients has therefore become critical in maintaining income levels.
“It is possible that both lenders – through lower rates for retention and product transfers – and brokers – through reduction or removal of fee charging – could sacrifice margin short-term for a long-term relationship with an existing client.”
Foundation Home Loans director Jeff Knight says: “It costs up to four times more to obtain a new client than retain one.
Client retention is vital, even more so in these uncertain market conditions. For most intermediaries, referrals are the major source of new business enquiries, but these referrals only happen if you have good relationships with existing clients.
“A bit more focus on client retention will hit your bottom line too. Studies show that even a 5 per cent increase in retention rates can equate to more than a 25 per cent increase in profits. The key is communication.”
From a lender perspective, fewer purchase transactions, as predicted by Rics for Q1, leads to encouraging an increasing number of existing customers to remortgage.
L&C Mortgages associate director David Hollingworth says: “With lender appetite showing no signs of abating and more lenders with strong ambition for the new year it looks set to remain ultra-competitive.
“Competition has seen lenders cutting rates already. I would expect that we will see a regular, ongoing tweaking of products as lenders adjust and readjust to moves by competitors.
“If the purchase market continues to be muted, then all eyes will be on the remortgage sector and lenders will be aware that they need to price competitively to attract borrowers.
“It’s always important for brokers to keep in touch with their customers, rather than simply expect them to come back when their deal comes to an end.”
According to Knight, the importance of good communication between lender, broker and customer is essential to building relationships and therefore retaining clients and generating more referrals.
Knight adds: “Often clients that have not been in touch for several years are seen as lost, but a lost client does not equate to a lost cause and these clients are twice as likely to use your services in comparison to a new client.”