Table of Contents
Introduction
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- Market definitions
- Abbreviations
Issues in the Market
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- What are the main threats to the mortgage industry in 2012?
- Will there be a return to favour of 3-year and 5-year fixed rate mortgages?
- Will the rental market increase in popularity as the mortgage market struggles?
- What will the impact of changes to mortgage lending rules be?
- What measures can be taken to boost the mortgage market?
Executive Summary
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- The market
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- Figure 1: Forecast of gross mortgage advances, 2006-16
- Market factors
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- Figure 2: Annual house price growth in the UK – comparison of four different sources, Q1 2007-Q3 2011
- Companies, products and innovation
- Market share
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- Figure 3: Top six mortgage lenders, by gross advances, 2011
- Brand research
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- Figure 4: Attitudes towards and usage of brands in the mortgage sector, January 2012
- The consumer
- Mortgage application intentions
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- Figure 5: Mortgage application intentions, January 2012
- Influencing factors when choosing a mortgage provider
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- Figure 6: Factors influencing mortgage provider choice, January 2012
- Attitudes towards mortgages
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- Figure 7: Attitudes towards mortgages, January 2012
- Property price expectations
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- Figure 8: Expected property price performance, January 2012
- Preferred method of mortgage arrangement
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- Figure 9: Preferred method of arrangement, January 2012
- What we think
Future Opportunities
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- Mortgage providers must recognise the need for the human touch
- Consumers owe it to themselves to learn about mortgage options
Internal Market Environment
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- Key points
- Bank of England base rate remains flat
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- Figure 10: Bank of England base rate, three-month (monthly average) LIBOR and new mortgages effective rate, January 2005-December 2011
- Number of mortgage products increases…
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- Figure 11: Number of mortgage products available, by LTV band, Feb 2008-Sep 2011
- … but no major changes in number of mortgage approvals
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- Figure 12: Number of mortgage approvals (SA), by type, Jan 2007-Nov 2011
- Number of residential property transactions stable
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- Figure 13: Number of £40,000+ UK residential property transactions (SA), Q1 2007-Q1 2011
- 2011 arrears and repossession rates flat in 2011
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- Figure 14: Mortgage arrears and repossessions, Q1 2008-Q3 2011
- MMR lending rules from the FSA being finalised
- A positive outlook for 2012 is hard to come by
- Longer term forecasts lack conviction
- Government has suggested a cap on LTV ratio
- Changes to stamp duty threshold will make it harder still for first-time buyers
- First-time buyers rush to beat stamp duty holiday expiry
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- Figure 15: First time buyers, lending and affordability
Broader Market Environment
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- Key points
- House prices remain flat
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- Figure 16: Annual house price growth in the UK – comparison of four different sources, Q1 2007-Q3 2011
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- Figure 17: Quarterly write-offs of secured lending to individuals, Q1 2007-Q3 2011
- Rise in unemployment is bad news for mortgage providers
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- Figure 18: UK unemployment rate, Q1 2005-Q3 2011
- Customer confidence is not improving
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- Figure 19: GFK NOP Consumer Confidence Index, January 1988-December 2011
- Total number of UK households set to grow…
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- Figure 20: UK households, by size, 2006-16
- … but the housing supply isn’t keeping up
- Growing level of retirees could create market for equity release mortgages
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- Figure 21: Forecast adult population trends, by lifestage, 2006-16
- The housing market is seasonal
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- Figure 22: UK residential property transaction counts, by month, 2006-11
Competitive Context
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- Key points
- Private renting is the only alternative to home ownership
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- Figure 23: Housing stock in England, by tenure, 1981-2011
- Is the UK housing market set for a more continental approach?
- Private renting has many advantages over home ownership…
- … yet home ownership remains a goal for many
- The advantages of home ownership over private renting
SWOT Analysis
Who’s Innovating?
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- Key points
- First-time buyers/high LTV % innovations
- Halifax offers no-fee mortgage to FTBs
- Co-op Bank cuts five year fixed mortgage rates
- HSBC offers sub-4% interest rate on 90% LTV mortgages
- Ipswich offers 95% LTV mortgage
- Mobile app innovations
- Protection app from Openwork
- Tiuta offer new app for loan calculations
- Buy-to-let innovations
- Platform launches new buy-to-let mortgage products
- Yorkshire Building Society buy-to-let offering expanded
- Barclays relaunches 75% LTV buy-to-let deal
Market Size and Forecast
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- Key points
- Small increase in the value of gross and net mortgage advances
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- Figure 24: Gross mortgage advances, 2005-11
- Building societies and specialist lenders leading the lending charge
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- Figure 25: Gross mortgage lending, by type of lender, 2005-11*
- Tracker mortgages see popularity increase as BoE base rate remains low – but for how long?
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- Figure 26: Kind of mortgage, 2007-11
- The value of loans for house purchasing fell by 6% in 2011…
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- Figure 27: Gross mortgage lending, by type of loan, 2005-11
- … as did the number of house purchase loans
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- Figure 28: Loans for house purchase, by type of borrower, 2005-11
- Moderate growth expected in mortgage lending over the next five years
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- Figure 29: Forecast of gross mortgage advances, 2006-16
Market Share
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- Key points
- Lloyds Banking Group remains market leader
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- Figure 30: Top six mortgage lenders, by gross advances, 2010 and 2011
- Top six lenders control almost 80% of outstanding balances
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- Figure 31: Top six mortgage lenders, by amounts outstanding, 2010 and 2011
- A decreasing number of people are switching mortgage providers
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- Figure 32: Changed mortgage provider in the past 12 months, 2007-11
Companies and Products
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- Lloyds Banking Group
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- Figure 33: Lloyds Banking Group financials, H1 2010-H1 2011
- Santander
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- Figure 34: Santander financials, H1 2010-H1 2011
- RBS Group
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- Figure 35: RBS financials, H1 2010-H1 2011
- HSBC
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- Figure 36: HSBC Bank plc financials, H1 2010-H1 2011
- Barclays
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- Figure 37: Barclays plc financials, H1 2010-H1 2011
- Nationwide
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- Figure 38: Nationwide Building Society financials, H1 2010-H1 2011
Brand Communication and Promotion
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- Key points
- Fall in overall adspend but some areas seeing a big push
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- Figure 39: Total mortgage adspend, by sub-category, 2006/07-2010/11
- Barclays is the top mortgage advertising spender
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- Figure 40: Total mortgage adspend, by company (top 10), 2009/10-2010/11
- Advertising strategy is evolving along with the mortgage market
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- Figure 41: Total mortgage adspend, by media type, 2006/07-2010/11
- Reactive and seasonal advertising drives adspend peaks and troughs
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- Figure 42: Monthly total mortgage adspend, 2010
Brand Research
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- Brand map
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- Figure 43: Attitudes towards and usage of brands in the mortgage sector, January 2012
- Correspondence analysis
- Brand attitudes
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- Figure 44: Attitudes towards brands active in the mortgage sector, January 2012
- Figure 45: Personality of brands active in the mortgage sector – macro image, January 2012
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- Figure 46: Personality of brands active in the mortgage sector – micro image, January 2012
- Brand experience
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- Figure 47: Use of brands active in the mortgage sector, January 2012
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- Figure 48: Satisfaction with various brands active in the mortgage sector, January 2012
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- Figure 49: Consideration of brands active in the mortgage sector, January 2012
- Figure 50: Consumer perceptions of brand performance among mortgage providers, January 2012
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- Figure 51: Brand recommendation – Net Promoter Score, January 2012
- Brand index
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- Figure 52: Mortgage sector brand index, January 2012
- Figure 53: Brand index vs. recommendation in the mortgage sector, January 2012
- Target group analysis
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- Figure 54: Target groups, January 2012
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- Figure 55: Mortgage brand usage, by target groups, January 2012
- Group One – Conformists
- Group Two – Simply the Best
- Group Three – Shelf Stalkers
- Group Four – Habitual Shoppers
- Group Five – Individualists
Channels to Market
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- Key points
- The intermediary marketplace needs to show its worth
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- Figure 56: Proportional distribution of regulated mortgage sales, by channel, 2006/07-2010/11
- The number of intermediary firms is falling across the board
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- Figure 57: Number of mortgage/home finance appointed representatives and directly authorised intermediary firms, by type, Sep 2006-Sep 2011
Mortgage Application Intentions
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- Key points
- Just under four in ten people are homeowners with a mortgage
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- Figure 58: Current UK housing situation
- Some 17% of people are considering applying for a mortgage in 2012
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- Figure 59: Mortgage application intentions, January 2012
- Current mortgage owners most like to apply for a some sort of mortgage in 2012
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- Figure 60: Mortgage application intentions, by current housing situation, January 2012
- 25-35-year-old are most likely to make a mortgage application
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- Figure 61: Mortgage application intentions, by age, January 2012
- Mortgage ownership at lowest point of last five years
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- Figure 62: People who have a mortgage, 2007-11
- Mortgage uptake has been dwindling in a post-financial crisis world
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- Figure 63: When mortgage was first taken out, 2007-11
Factors Influencing Mortgage Choice
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- Key points
- Interest rates trump all other attributes when people choose their mortgage
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- Figure 64: Factors influencing mortgage provider choice, January 2012
- Capital plus interest mortgages remain the most popular option
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- Figure 65: Type of mortgage, 2007-11
Attitudes Towards Mortgages and Residential Property
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- Key points
- Despite some nerves people still believe that property is a worthy investment
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- Figure 66: Attitudes towards mortgages, January 2012
- Belief in property as a long-term investment is driving mortgage application in 2012
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- Figure 67: Attitudes towards mortgages, by mortgage application intentions, January 2012
Property Price Expectations
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- Key points
- Consumers predict a stagnated market over the next 12 months
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- Figure 68: Expected property price performance, January 2012
- Young people are more confident of property price increases
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- Figure 69: Property price expectations, by age, January 2012
- Londoners are most likely to expect property prices to grow
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- Figure 70: property price expectations, by region, January 2012
- Renters expect property prices to decrease
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- Figure 71: Property price expectations, by housing situation, January 2012
- People planning on applying for a mortgage are much more likely to expect property price increases
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- Figure 72: Expected property price performance, by mortgage application intentions, January 2012
- Providers need to tap in to the positive property thinkers
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- Figure 73: Attitudes towards mortgages, by expected property price performance, January 2012
Mortgage Arrangement
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- Key points
- People like the human touch when arranging a mortgage
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- Figure 74: Preferred method of arrangement, January 2012
- People looking for a remortgage keener to arrange it remotely
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- Figure 75: Preferred method of arrangement, by mortgage application intentions, January 2012
- More confidence among those prepared to go direct
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- Figure 76: Attitudes towards mortgages, by preferred method of arrangement, January 2012
Targeting Opportunities
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- Key points
- One third of people are the Wary Wealthy
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- Figure 77: Targeting groups, January 2012
- The Cautious Optimists
- The Wary Wealthy
- Safety Seekers
- The Unconcerned
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- Figure 78: Target groups, January 2012
- Safety Seekers and the Wary Wealthy are most likely to apply for a mortgage in 2012
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- Figure 79: Mortgage application intentions, target groups, January 2012
- The Cautious Optimists are not confident in property price performance
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- Figure 80: Expected property price performance, target groups, January 2012
- The less confident groups are most hesitant about remote mortgage arrangement
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- Figure 81: Preferred method of arrangement, by target groups, January 2012
Appendix – Brand Research
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- Figure 82: Brand usage, January 2012
- Figure 83: Brand commitment, January 2012
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- Figure 84: Brand momentum, January 2012
- Figure 85: Brand diversity, January 2012
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- Figure 86: Brand satisfaction, January 2012
- Figure 87: Brand recommendation, January 2012
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- Figure 88: Brand attitude, January 2012
- Figure 89: Brand image – macro image, January 2012
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- Figure 90: Brand image – micro image, January 2012
- Figure 91: Profile of target groups, by demographic, January 2012
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- Figure 92: Psychographic segmentation, by target group, January 2012
- Figure 93: Brand usage, by target group, January 2012
- Brand index
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- Figure 94: Brand index, January 2012
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Appendix – Mortgage Application Intentions
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- Figure 95: Mortgage application intentions, by demographics, January 2012
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Appendix – Factors Influencing Mortgage Choice
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- Figure 96: Factors influencing mortgage provider brand reputation and interest rates, by demographics, January 2012
- Figure 97: Factors influencing mortgage provider option to have a personal mortgage consultant, by demographics, January 2012
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- Figure 98: Factors influencing mortgage provider will lend to self-employed/people with irregular income, by demographics, January 2012
- Figure 99: Factors influencing mortgage provider option to make additional payments without penalty, by demographics, January 2012
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- Figure 100: Factors influencing mortgage provider choice, by mortgage application intentions, January 2012
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Appendix – Attitudes Towards Mortgages
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- Figure 101: Agreement with the statements ‘Property is a good long-term investment’ and ‘I’d struggle to get a new mortgage/remortgage in the current climate’, by demographics, January 2012
- Figure 102: Agreement with the statements ‘I intend to make overpayments on my mortgage this year’ and ‘I’m nervous about buying property/getting a new mortgage in the current climate’, by demographics, January 2012
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Appendix – Property Price Expectations
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- Figure 103: Expected property price performance, by demographics, January 2012
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Appendix – Mortgage Arrangement
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- Figure 104: Preferred method of arrangement, by demographics, January 2012
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Appendix – Targeting Opportunities
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- Figure 105: Target groups, by demographics, January 2012
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Appendix – Market Forecast
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- Figure 106: Forecast of gross mortgage advances, 2011-16
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