HBOS says it will retain retention payments to brokers despite admitting that last year’s retention strategy was an error of judgement which caused a big drop in market share.
Its share of the lending market was halved in the first six months of 2007 to less than 10 per cent from its normal range of 15 to 20 per cent.
Head of media relations Mark Hemingway says the group underestimated the competitiveness of rivals’ rates in the first part of 2007 as many two-year fixed deals ended.
Its retention strategy involved making payments to brokers and repricing new and existing rates at similar levels.
Hemingway says the retention fee strategy has worked well and will be kept. However, HBOS, which owns Halifax and Bank of Scotland, had to take corrective action earlier this year to reprice rates for new and existing customers as it was being undercut by competitors.
A trading statement from HBOS says: “The retention strategy introduced in the latter part of 2006, designed to trade an element of gross share from improved principal repaid, has not delivered the anticipated benefits. We are now seeing improved performance, having taken corrective action in the second quarter.”
Hemingway says: “We took corrective action as soon as it became apparent that our pricing strategy meant that we were being undercut by rivals in the early part of 2007.
“Rates are now back at competitive levels and our lending share is on the rise. On the other hand, our retention payments to brokers have worked well and are being kept.”