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The mortgage lending market is expected to decline by 10% in the next three years, a study by market analyst Datamonitor suggested. With the property market lying still, there is bound to be about a 15% reduction in the tendency among people to take up more loans and mortgages until up to possibly 2007.
Datamonitor also foresees the Bank of England’s constant base rate background to decelerate remortgaging of the current properties by 6% to £115bn in the next three years.
Figures by Nationwide and Halifax reveal that there was hardly any movement in the average price of a home in the past six months in UK. This was observed along with the freeze in the interest rate by the Bank of England at 4.75%. Financial services analyst at Datamonitor, Edward Ripley said that it was now necessary for lenders to think of fresh and creative ways to be able to get their hands on a share of the receding market.
Generally, lenders were seen focussing on short-term fixed-rate or discounted deals to lure borrowers, hoping that they would stick on even after the short term lapse or discount end. Nevertheless, with consumers increasingly adopting the ‘switch lenders’ trend to avail more gain over their deals, this strategy of the lenders seems to need an overhaul.
Furthermore, Mori FS data states that the average time that borrowers between ages 35 to 44 continued with their lenders had conspicuously fallen since 1997 from 7.8 years to 5.4 years in 2004. This observation might influence many lenders to focus more on their present customers and strive to keep them satisfied, just like what Nationwide is doing.
Mr. Ripley expects to see lenders concentrating more on retaining existing customers by doing away with “short term price-led acquisition strategies and serial remortgagers and develop selective acquisition processes to prevent future churn.”
Consequently, lenders will now want to fix one rate for both current as well as new customers as an attempt to hold them for a longer period of time.
Posted
on : Thu, 07 Apr 2005 00:00 GMT | Mortgages News
By : Mark Richardson
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