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News Review: Specialist Prime

Time to check who your customers are by Charles

Haresnape, managing director, Aldermore Residential Mortgages

I had one of those very inter- esting conversations in the pub recently, which made me realise just how wrong com- monly held perceptions can be.

A friend asked me about the sectors of the mortgage market that Aldermore op- erates in and, during the course of the conversation, expressed the view that sell- ing mortgages must be like falling off a log “because ev- erybody needs one”. His view, and I suspect the

view of most people, is that nearly everyone takes out a mortgage at some stage be- tween the ages of 20 and 30 and as people approach re- tirement age, the percentage of people holding a mortgage reduces. Selling mortgages was, in my friend’s mind, like selling sweets to children; how could it be a difficult challenge when everybody needs a mortgage to put a roof over their heads? In fact, the only difficulty

he foresaw for Aldermore was that we didn’t have a branch network:


everyone go to a bank or building society branch on their local high street to get a mortgage?”

Client habits How wrong he was on every count. I felt pretty confident in my response because that day I had been reading the latest Datamonitor report on

consumer mortgage buying habits. I pointed out that, contrary to his belief, only 40% of UK consumers hold a mortgage. I also pointed out that just as many people apply for their mortgages via an intermedi- ary as those who go to a high street bank or building soci- ety branch. And I concluded by explaining that the aver- age age of a first-time buyer was 33 and, contrary to his view that the age group with the highest level of mortgage ownership was 20-30 year olds, it was in fact 45 to 55 year olds.

Counterintuitive I also threw in a couple of extra facts to really confuse him. He thought that wealthy people would be more in- clined to use a broker in order to secure the best pos- sible mortgage deal. I point- ed out that the people who used brokers the most were those with an income of up to £25,000. In fact, as con- sumers’ incomes increase, so their use of intermediaries to secure mortgages declines (from 51% for those in the £15k to £25k income brack- et, to 30% for those earning more than £125K). However, only a third of those in the £15k to £25k income group hold a mortgage, whereas 65% of consumers in the £75k to £125k band hold a mortgage. He definitely thought I

was winding him up and had drunk one pint too many! On my way home that eve-

ning, the conversation got me thinking about the as- sumptions we make about the people to whom we sell


our products. I’m sure every- one in the mortgage industry is well aware that the average age of first-time buyers is 33 and not 23, but how well do we understand the income profile of potential custom- ers? For example, it may sur- prise some people to know that two-thirds of those in the higher (£75k to £125k) income group hold a mort- gage and therefore consti- tute a key target market, but as their income increases, so they are less likely to consult a broker.

Loyalty vs income In fact, this higher income group appears to account for the most loyal bank and building society customers. According to Datamonitor’s research they’re also one of the least likely income groups to apply for a mortgage via an internet only provider (along with those in the £15k to £25k income group. It’s the £25-£75k income group who appear to be confident on- line buyers, along with those earning more than £125k). Which is all very interest- ing and 20 minutes spent looking at research results can certainly generate plenty of “well I never” moments. But there are dangers in placing too much emphasis on such data.

Perspective Research is by definition a summary. This particular study was conducted online and elicited responses from just over 2,000 respondents. That makes the results sta- tistically robust but it doesn’t mean that this profile will necessarily match the profile

of borrowers in Birmingham, Bolton or Barnstable. It’s a national average. Likewise, some of the data needs careful interpretation. For example, one question asked if people used a broker or other intermediary when they made their most recent mortgage application. Sur- prisingly, the group with the highest yes response (60%) was the 65+ age group (as opposed to just 36% in the 45-54 age group). However, if I asked my parents who are 65+ if they used a broker when they last applied for a mortgage, the answer would be yes - but they last applied for a mortgage over 30 years ago, when they would have fallen into the 35 - 44 age group.

“It’s easy for your customer profiles to subtly shift over a period of years, without you noticing”

Guidelines National surveys provide a useful point for comparison but they may not accurately reflect precisely what’s going on in your parish. Nonetheless, if the data is

easily obtainable, it may be a useful exercise to check the profile of your clients every few years. It’s easy for your customer profiles to subtly shift over a period of years, without you noticing. We all think we know who are cus- tomers are, but do we really? It may be time to check.

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