Mortgage lenders in the UK market are under immense pressure from factors such as impairment risk, the closing of the capital markets, and low deposits rates, which have constrained funding and lending volumes.

Most UK banks and building societies rely on an unscientific approach to manage their mortgage portfolio, responding reactively to all borrowers at the point of maturity. They are unintentionally allowing creditworthy borrowers with the lowest impairment risk to pre-pay, and disproportionately retaining high credit risk borrowers who have no alternative than to remain on the standard variable rate (SVR). Net profit contribution and capital utilisation are further threatened by the cost of loss provision in the back book.

The cost of loss provision is reported to have risen by up to 100 basis points in the last 12 months.

With a best-in-class Pricing and Profitability Management approach, enabled by the Nomis Mortgage Portfolio Optimizer™ (NMPO) solution suite, Mortgage executives can optimise net profit contribution and capital utilization in two steps:

First, classifying borrowers into detailed profiles based on propensity to pre-payment and delinquency behaviour and based on response to product features, pricing levels, channel convenience, and brand benefits.  Second, developing product, pricing and contact strategies to maximise retained net profit by optimising:

• Who to contact?
• When to contact them?
• What product to offer them?
  
  

The Nomis Mortgage Portfolio Optimizer™ Solution Suite
The Nomis Mortgage Portfolio Optimizer solution suite enables Mortgage lenders to manage their portfolios for profit and return on capital by differentiating customers who respond well to proactive repricing from those who don’t. Through deep customer insight, leading-edge predictive analytics, and best-in-class practices and processes, the solution helps Mortgage lenders understand the profiles and behaviour of segments within the portfolio

It also helps them make decisions about which customers to proactively contact and when, and configure the optimal offer or discretionary discount structure to maximise the profitability of each customer.

NMPO is currently deployed by two top building societies in the UK market and is consistently delivering 5 to 15 basis points net profit uplift per £bn at risk.

Financial Benefits

• Increase net income contribution (10–20 million 5-year Net Present Value per  £ billion at risk)
• Increase market share by 15 - 25bps year over year vs. business as usual
• Increase net interest margin through widening average spreads by 5 – 10 bps

Operational benefits

• Use a closed-loop contact strategy to ensure operational processes are aligned to retain borrowers with maximum Net Present Value return
• Reduce operational complexity and focus expert resources on high value segments
• Adopt a more efficient and effective renewal and retention process
  

Strategic Benefits

• Drive profitable gains in market share through asset growth / retention
• Reverse margin compression via better control of price discretion
• Increase customer retention and satisfaction by better understanding customer behaviour

Why Nomis Solutions?
Nomis Solutions has deep knowledge of the drivers of UK mortgage market behaviour from up-to-date consumer research embedded in the Nomis Mortgage Portfolio Optimizer suite. Our team has five years experience implementing proven Mortgage Portfolio Optimization solutions in the UK market and implementing the company’s award-winning Nomis Price Optimizer™ software in other lines of business in Canada, the United Kingdom and the United States. We have the ability to enable you and your team to quickly deliver a material impact on financial performance.

To learn more, read the press release Skipton Building Society Enhances Mortgage Portfolio Performance with
Nomis Solutions’ Customer Portfolio Optimizer. 

Contact us to learn how we can help your Mortgage business achieve similar results.