The study has identified an average benchmark figure for application processing of £116 per case. Marlborough Stirling says lenders could reduce this figure by around 28% to £84. This would result in an annual cost saving for the mortgage market of £82 million, based on the total number of loans made in 2002**.
Thirteen lenders took part in the study to benchmark their point of sale and application processing functions and compare these against their competitors. The study showed that cost is not the only important consideration for mortgage lenders. Quality of service, levels of productivity and speed of processing are also crucial.
Cost versus Quality
The study includes a Cost versus Quality matrix that shows the majority of lenders are operating in a ‘compromise position’ of medium quality and medium cost. Marlborough Stirling believes that those lenders occupying this position are in danger of lacking significant market differentiation.
Productivity
The study also shows that on average lenders could double their productivity levels. It measured productivity in terms of number of completions per FTE (full time equivalent employee) per day. The industry benchmark is 1.56 completions per FTE while the best in class figure was almost double this at 2.84.
Speed
Speed of processing can be used as a key differentiator for customers when deciding on which lender to choose. The study analysed the average time taken from receipt of application to issue of the offer. The average industry benchmark figure is almost 16 working days, the best in class figure is 7 working days.
Marlborough Stirling claims that to operate at optimal efficiency lenders need to place greater emphasis on clarifying their current and future market positioning. They can then implement appropriate strategies designed to reposition themselves against the benchmark and review what impact these strategies have had in next year’s study. Strategies being recommended by Marlborough Stirling include:
- The adoption of Straight Through Processing of mortgage applications on a single technology platform
- Two-way automation of all business-to-business touch-points within the mortgage application process such as valuations and conveyancing
- Integrated workflow management that eliminates non-essential tasks and increases efficiency
- Re-engineer processes to maximise staff effort on productive tasks
Phil Heaton-Jones, head of mortgage product management and consulting at Marlborough Stirling, comments:
"With mortgage regulation fast approaching it is vital that lenders understand how their processes measure up to those of their competitors. The study shows there are significant discrepancies between the best performers and those at the lower end of the scale. We are urging lenders to use the key performance indicators to help them identify where they can improve operations and achieve a competitive advantage.”
Each lender participating in this benchmarking study has now received a full report of the results which includes the following information:
- The full benchmark results that demonstrates in tabular format how each company compares against the benchmark and its competitors
- A detailed breakdown of the lender’s mortgage application process in terms of time, costs and quality and how this compares against the benchmark
- A list of key observations and recommendations for that particular lender
For further information on the Benchmarking Study lenders can contact Chris Darlington on 01242 547 000
*The study was conducted in association with the Council of Mortgage Lenders
**2,533,000 - Source CML
