Tony, who has over 30 years of experience in mortgage markets, will be sharing the stage with his equally experience colleague David Abshier, managing director at of BRG in the US. They’ll be comparing the challenges and opportunities in the US and Europe for lenders beset with narrowing margins, falling back-book profitability, intense competition for good customers and rising regulatory scrutiny and risk.
Common to both markets, according to Tony, is that many lenders are focusing on the wrong type of growth. They continue to pursue market share and gross lending when what they actually make money from—net lending—is growing at a puny rate.
“The lending recovery is not what it seems” is Tony’s stark message. “Net mortgage advances can only grow through hugely inefficient churning of the existing market: To grow a book by 100 customers, given that providers will lose nearly 700, they will need to acquire 800 customers.” And, as we all know, that’s becoming really difficult and expensive, especially as new providers challenge traditional business models and methods.
Tony says the factors fueling high customer churn rates—including lender shortcomings in helping new customers understand their loans and providing fair rates to existing customers—are attracting increasing regulatory scrutiny by the UK’s Financial Conduct Authority and the US Consumer Financial Protection Bureau. But assertive pricing of mortgages is not, according to Tony, at odds with customer-focused conduct that is alert to regulatory risk.
In their Banking Growth Forum session, Tony says he and his colleague will talk about how lenders can align the interests of customers, regulators and shareholders. They’ll discuss the important role of analytics in behavioral pricing, which enables lenders to meet diverse consumer needs through mortgage products that are as flexible as they are profitable. They’ll argue that it’s time to break the unsustainable cycle, take a fresh look at net interest margin and put mortgage lending on more solid ground. Find out more in the Banking Growth Forum general session Achieving Income Growth in a Consumer Regulated Environment—a US and European Perspective.