Mortgages are an important share of a bank’s portfolio. Given the resources that go into acquiring mortgage business, it makes sense to pay attention to the retention of mortgage customers. Proactive monitoring can help you take action at the right time to bring attrition levels down and keep more mortgage customers on your books. Our analysis of closed mortgage accounts reported to TransUnion shows you have approximately 19 days in which to save 15% of switchers —customers who would otherwise have moved their accounts to another provider. Here’s what the data tells us.
How much of your mortgage portfolio are you losing?
Canadians are opening larger mortgages than ever, as the average opening value of these loans has increased by 27% since Q3 2012. The average mortgage balance is around $310,000 (as of September 2017).
As mortgage business is a significant source of revenue for banks, financial institutions direct substantial resources toward acquiring more customers. Equally important is mitigating the loss of revenue from customer attrition by using data.
Closed mortgages in numbers
In 2016, just over 1.1 million mortgages reported to TransUnion were closed. We looked at the 90-day post-attrition activity on these accounts to determine if an opportunity existed to retain switchers.
For 54% (594,000) of closed accounts:
- 19% were renewed at the same financial institution
- 10% transferred to a home equity line of credit (3% at the same financial institution)
- 3% went to another financial institution
- 22% did not have another mortgage
In total, about 242,000 of those 1.1 million closed accounts were either renewed or transferred at the same financial institution.
For the remaining 46% (506,000):
- A new mortgage or line of credit was opened before the old account was closed
- Just two-thirds of these accounts were opened at the same financial institution
That means 15% of 1.1 million mortgage accounts across the industry were closed after a new account was opened at a different financial institution. As customers receive attractive mortgage “switch” offers, it appears they do not want to let their mortgages lapse.
At an average mortgage balance of $310,000, this can add up to a substantial loss of revenue, not to mention the additional costs involved in replacing those lost accounts.
And what can you do to prevent this? Usually, by the time you know about the new account with a different financial institution it’s too late to save your customer. But as these switchers close their accounts only after they’ve opened a new one, there is a window of opportunity for your retention efforts between these events.
By monitoring inquiries on your customers, you can trigger retention activities as soon as you receive an alert on an inquiry. Our research shows lenders could have about 19 days in which to act before customers move on.
Proactive portfolio management — monitoring your customer base, triggering alerts on inquiries, and taking action — can help you keep the customer you worked so hard to acquire. Just a simple service call or marketing campaign can turn the tables in your favour, converting a potential loss to retained business.
TransUnion has a range of solutions for monitoring and alerting you to customer behaviour that could indicate the need for retention efforts.
To find out more, visit transunion.ca/product/dynamic-monitoring