HBOS is Britain’s biggest mortgage lender, but its share of the market of new mortgages has fallen by more than half in the first five months of the year.
Its net share of new mortgages was down to 8%, compares with a 20% share of outstanding home loans. The bank introduced a new policy to narrow the gap between offers to new customers and existing ones. It seems that the policy has backfired. This is interesting given that many existing customers complain about not being able to get the good, low interest rate deals that are only on offer to new customers.
It has been standard practice for mortgage companies to make attractive deals available to new customers to get them onto the books, which existing customers are retained on loans at less competitive rates. Last year HBOS abandoned that policy, but as well as losing their share of new customers, it did not help to retain any old customers either.
As a result of these poor figures, HBOS has gone back to the old policy of attracting new customers with low interest rate deals. That immediately caused a bounce back, with new mortgages coming in at a 15% share of the market, which HBOS said it would look to retain for the rest of 2007.
HBOS believe that increasing competition has hit providers’ mortgage margins. The level of competition has intensified once again, and this caught HBOS by surprise.
The company’s new chief executive is Andy Hornby, who replaced James Crosby in 2006. Hornby was previously HBOS’s chief operating officer and was at Asda prior to joining HBOS.
HBOS has also introduced a policy to pay retention bonuses to intermediaries who retain more customers at the end of their loan period. As a result of this policy the bank reckons it has held on to about £5bn worth of business.
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