Nervous mortgage lenders are wielding a new and invisible weapon in their quest to drive away "high-risk borrowers" – even if they are already loyal customers. This is according to new research from mform.co.uk, the mortgage information service, which highlights the growing use of customer profiling among lenders.
It will result in a growing proportion being refused another fixed or discounted-rate deal and thus being forced on to their lender’s standard variable rate (SVR) – at an average 7.2 per cent. Customer-profile information is a separate tool to a borrower’s credit rating – a numerical score held by credit-reference agencies such as Experian and Equifax and dictated by how well you manage your debts. Customer profiling is perfectly legal. Neil Munroe, director at Equifax, says this kind of customer profiling was previously limited to credit cards and banking, but that mortgage lenders may now be taking the same approach. "There is a pick-up in the ongoing assessment of relationships between lender and borrower. "The majority of lenders use detailed internal data as well as credit information to assess a borrower’s risk."
Other lenders offer ‘retention rates’ which, though priced higher than those available to new customers, are still designed to retain custom."
"There are other lenders that may consider you for a new mortgage deal even if your current one doesn’t."
Finally, borrowers can hedge their bets as much as lenders. Last week, broker Savills Private Finance launched its Mortgage Rate Hedge offer. The deal runs to the end of June and offers customers the chance to book a mortgage rate six months in advance; if rates fall during that time, they are under no obligation to continue with the mortgage.