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Parallel lines

It is tricky writing this piece when I know that by the time you read this we will have had an important announcement that I might have liked to comment on. This week it is the pre-Budget report.

Gordon Brown wants to leave a lasting legacy and I suspect that housing is a sector he would like to do it in. My first bet would be an announcement of a long-term intention to raise stamp duty to European levels, nearly doubling the current levels. The justification will be that he will put a long-term damper on house price inflation. Using tax where interest rates have failed perhaps.

Second favourite is that he intends to work with lenders on the concept of a green mortgage. He will be looking to the industry to produce a subsidy on loans for energyefficient housing.

The real outsider is the risk of an annual property tax on high-value housing. It would only apply to a level of housing over a politically sensitive level, say, 1m properties to avoid the risk of losing votes.

The papers have focused on Nationwide’s decision to offer differential pricing on its purchase and remortgage business. The spin the press have put on it is that it is no longer offering the same deals to existing borrowers as new borrowers. I do not see it this way as it is still treating all remortgage customers whether new or existing the same.

Complex and differential pricing is a well established feature of all financial services as providers seek to balance new business volumes with margin on retained business and churn mitigation. I have previously referred to the car insurance market and again there are parallels. I recently got quotes for the same risk from Mini Insurance at 850, Churchill at 650 and Privilege at 550. No surprise until you realise that these are all RBS companies using the Direct Line platform. This brand differential pricing is played out in our market best by HBOS which it appears is smartly using a number of its brands to attract price-led business at different times while running active retention in parallel on other brands . If you get this game right, you can run your product positioning so that at any given month one brand is appealing to new business while another is offering less good rates but maintaining parallel pricing across its new and existing borrowers.

Why does this matter? Perhaps Nationwide should not kill the Portman brand, past master itself at retention, but use it to actively manage their margin in the way HBOS does.

Mark Chilton is chief executive of Purely Mortgages


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