More than two years after the first cases of COVID-19 were reported in the U.S., factors such as remote work and relocations, increased online shopping and a surge of millennial homebuyers entering the market have led to a fundamental reshaping of mortgage lending. And that’s not even mentioning the record-low interest rates the mortgage industry has benefited from.
In the face of these changes, today’s mortgage originators face greater competition than ever to grow their business and retain existing clients. Those who succeed in the years ahead will be the ones who learn to adjust their tactics by parting with ineffective and antiquated outreach strategies that don’t consider changing consumer purchase patterns or the customer experience.
A major opportunity exists for those willing to utilize the latest tools to understand online consumer shopping behavior. Mortgage originators who look to actual intent — rather than relying solely on limited data models, educated guesses and static demographic segmentation — can gain an edge and drive return on investment.
Fluctuating market
Mortgage lenders continue to ride the waves of a fluctuating real estate market. Historically low mortgage rates and permanently remote or hybrid workplaces have created greater economic access and geographic flexibility for many Americans.
Yet mortgage applications began declining in the fourth quarter of last year, a trend that continued into the early months of 2022. In its weekly applications survey, the Mortgage Bankers Association reported multiple decreases in the number of applications. For example, loan applications decreased week over week by more than 7% for the period ending Jan. 21, 2022, while the refinance index was a whopping 53% lower than the same week in 2021.
Purchase activity at this time resided 11% lower than a year earlier. Insufficient housing supply and elevated home-price growth continued to limit options for would-be buyers.
Rising millennials
U.S. home prices have jumped by about 25% since March 2020, The New York Times reported late last year. Median home prices in some small- and medium-sized cities rose by 28% to 46% last year.
Several factors contributed to increased home prices. These include low housing inventory from years of slow development with not enough entry-level homes built, more investors seeking opportunities in the residential market and an exodus of new remote workers leaving urban centers for suburban living. Pandemic-related construction stoppages, along with home sellers uncertain about moving or allowing people into their homes amid the spreading virus, further complicated matters.
With the right data and insights, mortgage originators can confidently identify where clients or prospects are in their buying journey and execute more profitable marketing campaigns.
The most significant impact on mortgage lending, however, may be the number of millennials entering the homebuying market. Millennials accounted for 51% of home-purchase loan applications in 2021, according to CoreLogic. In fact, millennials have comprised the largest share of purchase mortgage applications since 2016.
In the U.S., there are now more than 72 million millennials, defined as those born between 1981 and 1996 (currently ages 25 to 40), and the number shopping for a home continues to increase. Mortgage originators looking to capitalize on the tremendous opportunity with millennials must understand exactly where these consumers are in their shopping journey, as well as how and when they want to communicate.
Changing preferences
Mortgage shoppers of all ages want to hear from lenders but only at the right time and with a message that assists their purchase journey. Although millennials tend to be digitally savvy, they don’t necessarily want an online-only experience when shopping for a mortgage.
In fact, a 2021 Fannie Mae survey showed that the vast majority of homebuyers (87%) prefer speaking with a representative at all or some points in their journey to secure a mortgage. Only 13% prefer a strictly digital experience. The survey also showed that even though the majority of all consumers would rather use digital tools to start their mortgage process, most prospective homebuyers still prefer to interact with a mortgage professional to answer their questions.
When you consider that consumers in the market for a new loan or a refinance generally work with the first or second lender that successfully engages them, the importance of meeting consumers early in their journey shines as the key to a lender’s success. Success is defined by engaging when and where the homebuyer is ready.
With the right data and insights, mortgage originators can confidently identify where clients or prospects are in their buying journey and execute more profitable marketing campaigns. Simply put, the right data tells originators who the best prospects are, when they are shopping online and how best to reach them — whether it’s with a relevant email or a courtesy call from an experienced originator at just the right time.
Receiving cues
Innovative mortgage originators are turning to companies that specialize in consumer behavior and insights to help enrich and organize data collected directly from clients, or what is called first-party data. Enhanced first-party data, with privacy in mind, allows originators to connect static data points such as name, contact info or location with complex consumer behavior, which creates deep and distinct views of current consumer shopping behaviors.
Originators committed to making this transformation receive cues at the optimal time to engage with consumers, and these cues tell them the prime channels and messages with which to communicate. In one case study, a large international bank tapped into consumer behavioral data and tripled its mortgage closings. Lenders looking to capitalize on digital tools and consumer behavior can take several specific steps to build deep, distinct views of shopping patterns:
- Identify the ideal client profile and households within it. Create robust views of these households in an organized, centralized system.
- Time marketing outreach based on consumer behavior. Meet clients or prospects in the market when they need you most.
- Create personalized messaging to maximize initial engagement.
- Offer a gateway to the advice that homebuyers are seeking.
- Establish data-driven methods for regularly connecting with homebuyers based on shopping signals.
These enhanced targeting capabilities result in greater operational efficiencies and cost savings. This data will help lead to fewer efforts wasted on consumers who are not actively shopping.
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Consumer behavior within our industry has changed and our marketing behaviors must evolve as well. Technology can enhance a mortgage lender’s ability to help consumers make informed financial decisions and achieve the dream of homeownership. Mortgage originators can grow substantially if they are able to organize, segment, tailor and deploy data and technology to smartly engage prospective clients with salient information at optimal times during their homebuying journey. ●
