MORTGAGES AND INTEREST RATES: HOW BANKS CAN BECOME MORE ENGAGED WITH THEIR CUSTOMER

Ruaraidh Thomas, Managing Director, The GIG at DST

Recent reports have predicted that a hike in interest rates could be as close as ten months away^[1]. This certainly will be of grave concern for home owners who are tied into tracker mortgages, but this will also have an impact for first time buyers.

What does this mean then for mortgage providers?

With rising rates potentially on the horizon, if regular contact is not managed carefully by providers, it is too easy for them to be seen as “the bad guys”, when defaults and repossessions rise. To combat this, providers need then to carefully consider how they communicate with their customers. This consideration should focus on communicating how they can bring value through educating and advising existing customers about negotiating rate rises and ensuring existing as well as potential customers are only being targeted with transparent offers that are relevant, attractive and affordable.

FCA guidance on ‘Treating Customers Fairly’ (TCF) and its 2007 ‘Know Your Customer’ (KYC) tagline is key here. If premise and action for this policy is engaged with and embraced by providers, it could have real benefit to both the mortgage company and the borrower. Beyond altering a sometimes negative reputation of the industry, it will also open avenues towards better customer understanding. As it stands at the moment, criticism of the industry has come about from a perceived failure in their understanding of what it is that the customer wants and needs – offering blanket messaging for stagnant, unpersonalised financial product offers. This failure can be overcome by processing and comprehending the data that mortgage companies invariably already hold in order to craft communications that are pertinent to the individual customer.

The route to achieving this and facilitating more in-depth customer relations lies in careful and considered understanding of consumer behaviour. This insight can only be achieved through the analysis and further comprehension of customer data-sets. However, in order to implement this data-led approach, it is necessary to not only have all the customer data stored in one place, but also have overlaid within this any transactional data that mortgage providers might have available. This can then be combined with a detailed overview of any contact history to give a more gestalt picture of individual customers and their behaviour patterns.

This understanding will in turn facilitate a service that can really add value to the consumer. And, it is this value that can really support mortgage providers. Far from delivering a one-size-fits-all service, mortgage providers have a great opportunity to look at the data they have to hand, to drill down into the information that this provides them. For instance, a customer looking for a mortgage should only be offered a package that is relevant to them and is well within their power to afford. This could be as simple as encompassing an awareness of borrowers’ financial and personal circumstances, whether or not they are the sole breadwinner or on a fixed income for instance. What is vital is for providers to operate with a degree of sensitivity and responsibility in order to avoid being perceived as untrustworthy and purely commission driven.

Mortgage companies should not be seen as pariahs but more as enablers to a sustained future. Overall, the industry has an opportunity to reposition itself as one with their customers’ interests at its heart but whilst maintaining a competitive advantage. Consumers want to feel confident that they are dealing with firms where the fair treatment of customers is central to their culture, as well as being offered appropriately marketed products and services. Furthermore, these products need to perform as consumers have been led to expect, and the associated service be of an acceptable standard.

This should all be straightforward. Returning to the FCA’s guidelines on ‘TCF’ and combining this with a data-led approach has a great chance of helping to shift the negative perception of mortgage providers for good.

[1] The Sunday Times, Business, p1, 19^th October 2014