Savvy consumers hitting ERC revenues

At its annual general meeting, the Kensington Group admitted profits would take a hit in future as more people waited until the end of penalty periods to refinance, with lenders forced to concentrate on regaining money through new business.

For Mark Sismey-Durrant, chief executive at Heritable Bank, this has to be faced by lenders across the market.

“Kensington made a large profit from settlement charges but if customers are waiting to get through the penalty period, and this pattern continues across the industry, a lot of lenders are going to be squeezed. They will have to replace it with less rewarding business and, if they are not getting the charges as well, their business models will come under severe attack.”

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Ian Giles, director of marketing at Kensington Mortgages, believed lenders were facing up to this as the change in consumer behaviour had been happening for a number of years.

Also, with the increasing eradication of overhanging charges, this meant customers could move as soon as the offer period was up.

Giles said: “A few years ago, people were refinancing during penalty periods because they could get a better deal despite the charges, but now people are waiting as they are better informed, with brokers playing some part in this. Also, with overhanging charges dying out, this will happen more in future.

“However, this is happening across the wider financial services sector, with people more used to using the internet to move around and get the best deal.”

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