Mortgage lenders have endured a difficult year due to scarce housing inventory, high interest rates and low affordability, but they have achieved success in one regard, according to J.D. Power. Customer satisfaction has risen, with many companies pivoting effectively to meet the needs of the purchase-heavy market.
Per the J.D. Power 2023 U.S. Mortgage Origination Satisfaction Study, overall customer satisfaction with lenders grew to an average score of 730 on a 1,000-point scale, up 14 points year over year. That’s in spite of an average mortgage rate that has rapidly escalated and reached 7.79% in October, according to Freddie Mac.
With rates elevated, lenders have gotten creative and adaptable in the tough environment to raise satisfaction, and borrowers have reacted positively. Thirty-one percent — nearly a third — of mortgage customers picked their lenders solely because they offered the lowest rates, but 69% chose a lender for other reasons, such as personalized service.
“The value equation for mortgage originators has shifted from instant approvals and lightning-fast processing to helpful advice and creative problem solving,” said Bruce Gehrke, senior director of wealth and lending intelligence at J.D. Power. “Lenders that manage this transition well have a great opportunity to build customer goodwill and limit defection by showing customers they understand their unique needs and the challenges of the current market.”
“Two years ago, the mortgage market was an ultra-low-rate goldmine in which lenders were making big profits and the primary challenge was keeping up with demand,” added Craig Martin, executive managing director and global head of wealth and lending intelligence at J.D. Power. “It’s the opposite today with high rates and a lack of affordable homes leading to a limited number of eligible borrowers. To effectively compete in the future, lenders need to set themselves apart by focusing on addressing customers’ unique challenges and meeting their needs rather than selling a product.”
Fairway Independent Mortgage Corp. was able to nab the highest satisfaction score in J.D. Power’s 2023 ranking by doing just that, said Fairway CEO Steve Jacobson. The company earned a score of 776 to edge last year’s top lender, Rocket Mortgage, which scored 759.
“At Fairway, we continually talk about the primary need for speed, and the importance of smooth and timely closings. Borrowers want things to happen ASAP and without any hitches, and we have built our borrowing experience with that in mind,” Jacobson said. “We have systems in place that prioritize our customers and we believe this award recognizes that effort.”
Citi was third in J.D. Power’s ranking with a score of 756, followed by Prosperity Home Mortgage (748), Bank of America (747) and Movement Mortgage (745). Caliber Home Loans (737), CrossCountry Mortgage (737), PrimeLending (735) and Chase (733) rounded out the top 10.
With an improved average lender score, however, comes a higher standard, one that lenders may find difficult to maintain as aggressive cost cutting could take a toll with market conditions likely to remain adverse. And customers still clamor for more engagement: The percentage of borrowers in J.D. Power’s survey who say their loan representative should have been more involved surged to 40%, up from 29% last year.