Lenders reduce mortgage processing costs

Amanda Jarvis

October 14, 2004

This enables lenders to identify and analyse their competitive position within the industry. 

This is the second year Marlborough Stirling has conducted the benchmarking study, which has been developed in consultation with the Council of Mortgage Lenders to provide a truly independent industry benchmark of operating performance standards.   17 lenders took part in the 2004 study to benchmark their point of sale and application processing functions and compare these against their competitors.  9 of these lenders also took part in the 2003 study. 

The average costs for processing mortgage applications fell from £116 in 2003 to £89.67 in 2004.  The trend established by lenders that benefited from recommendations from the 2003 study shows that their average costs for mortgage processing reduced by £11.57 per case.  If all lenders had taken part in the study and streamlined their operations in a similar way the reduction could have been as much as £44 million* across the mortgage sector. 

In addition to cost of processing, the benchmarking study shows that lenders have improved many other areas of their operations as systems and business processes have been overhauled in the run up to FSA regulation of the mortgage market.  Other key findings of the study are:


Lenders are processing more applications per consultant than in 2003, with productivity per employee increasing from an average number of completions of 1.56 in 2003 to 1.7 in 2004.

Speed of Processing

Time taken to process mortgage applications remained consistent at 16 days in both 2003 and 2004.


Complaints per 100 customers dropped, from 2.84 in 2003 to just 1.58 in 2004.

Cost vs quality

Overall the study demonstrates that more lenders are now differentiating themselves through cost and quality than in 2003, either positioning themselves as offering low cost or low cost and high quality services. However a significant number of lenders still occupy the compromise position of medium cost, average quality. (See figure 1)

Intermediary lending

One of the new metrics to be measured in the 2004 study showed that the majority of lenders still receive intermediary business in paper format that has to be re-entered into their processing systems, leading to increased costs and higher risk of errors.  13 of the 17 lenders involved in the study receive over 70% of introduced business in paper format.  However, over half of the lenders sampled recognise the importance of being competitive in a regulated environment and propose to make KFIs available to intermediaries via their website following M-Day.

Phil Heaton-Jones, director product development, mortgages at Marlborough Stirling, comments:

“These results demonstrate real improvements by lenders in reducing costs, increasing efficiency and providing a high quality service.

“While forthcoming regulation appears to be acting as a catalyst for the industry to review internal processes and back-office office systems, we also hope this study is helping lenders to identify areas on which to focus.  Next year’s study should enable us to assess the true cost and quality impact of mortgage regulation.”


The benchmarking study is designed to enable lenders to identify areas of competitive advantage, to increase efficiency and reduce costs while maintaining appropriate service levels.  Marlborough Stirling developed the benchmarking questionnaire, in consultation with the CML, enabling lenders to supply the required data against which to benchmark their operations.  Throughout the process, a dedicated helpline is available to support lenders in completing the questionnaire.

The completed data is fed into a mortgage processing model which enables lenders to evaluate business costs, quality and productivity against the benchmark.  A management report is produced for each participating lender highlighting strengths, weaknesses, opportunities and threats including recommendations to add value to their strategic planning process.  Additionally, Marlborough Stirling provides a presentation to each participant’s senior management team highlighting the key findings.  Confidentiality of participants’ data is ensured throughout the process.

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