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Ask Gini: Rate Chasers – Which to Keep and How to Retain Them

blog-thumbails-AskGiniDear Gini,

Our mortgage attrition rates are rising because market rates are decreasing and competition is increasing. Should I offer a rate decrease refinance to all our customers?

Thanks, Jill


Dear Jill,

Before I answer your question, may I humbly request that you never use the phrase “all our customers” in front of me again. This offends my deeply held belief about the importance of customer segmentation and tailoring treatment to fit each segment. Think about this. Let’s say you went to a restaurant and ordered a steak to be cooked medium and your server told you “we prepare our steaks rare for all our customers.” How would you feel about the restaurant not bothering to minimally prepare steaks within the three broad categories of rare, medium, and well done?

Dropping your rates for all your customers makes no more sense than a restaurant preparing its steaks rare for all its customers. Putting your customers into the following three groups is a better way of dealing with your mortgage attrition problem.

Choose to Lose

These customers are generally late making their mortgage payments and have other delinquencies on their credit reports. Let these customers try to take their business to your rate-slashing competitor down the street. Many will be unsuccessful or will change their mind. Why? “Choose to Lose” customers won’t get the advertised rate. Most likely your competitors will offer them an interest rate equal to or higher than what they already have with you because of their credit history. Offer these customers a lower interest rate, and you’re no better than the restaurant cooking all its steaks rare. This is a no-brainer – let these customers go.

What Rate Changes?

Some customers don’t pay any attention to the interest rate market. If asked, they probably don’t remember what mortgage rate they’re paying. Most can’t be bothered to refinance. They shudder at the thought of doing so no matter how streamlined your process is. As they say, “let sleeping dogs lie.” Don’t plant the seed of refinancing in the heads of “What Rate Changes?” customers by offering a lower rate to all your mortgage holders. If you do, they might check out what your competitors have to offer. You’ve just contributed to your own mortgage attrition problem.

Savvy Shopper

Chances are “Savvy Shoppers” have called your customer service line and gotten their current balance and rate and anything else they need to take their business elsewhere. They’ve shopped around and know what all your competitors are offering. Most have spotless credit records and know they’ll get your competitors’ advertised rates. What do you do to retain them? First, your customer service agents must be trained to identify these customers and refer them to a product or sales agent who can refinance and retain them. Second, get proactive. Regularly pull reports that list customers who had high credit scores when they originally applied and have an interest rate higher than current market rates. Reach out to them and offer refinancing options before they head off to a competitor. Carefully develop the scripts your sales people will use though. They’ll want to identify “What Rate Changes?” customers early in the conversation and avoid offering a refinance option.

Be professional with all your customers, but the fact is all customers are not created equally nor should they be treated as such. Now, you deserve a good dinner and I hope they prepare your steak exactly how you like it. While you’re enjoying that steak, think about the next question you’d like to submit to “Ask Gini.”



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BankersLab AdminAsk Gini: Rate Chasers – Which to Keep and How to Retain Them