By Roy Urrico
Finopotamus aims to highlight white papers, surveys and reports that provide a glimpse as to what is taking place and/or impacting credit unions and other organizations in the financial services industry.
A third (31%) of Americans are less confident in their ability to afford a home today compared to five years ago, and a majority of consumers (55%) expect mortgage rates to continue rising through the end of 2023.
Those are two of the findings in a nationwide mortgage lending survey by Costa Mesa, Calif.-based MeridianLink, a provider of software platforms for financial institutions (FIs) and consumer reporting agencies. The nationwide survey polled more than 1,000 Americans about consumer behavior and expectations during the mortgage lending process.
The report also summarized the results of the survey spotlighting how potential homebuyers shop for mortgages, underscoring the need for financial institutions to be equipped with the right tools to support consumers as they navigate the homebuying process.
Other findings included:
· About a fifth of Americans (22%) reported not understanding the mortgage process at all.
· Nearly half (45%) of Americans will shop for other options before getting a mortgage through their primary financial institution.
· Forty-one percent said their primary financial institution offered no mortgage lending support.
· The top reasons consumers reported for selecting a mortgage lender were low closing costs and comparatively better rates (53%), positive brand reputation (40%), and flexible repayment options (36%).
“These findings demonstrate why financial institutions need to be better equipped with the right tools to support their consumers during major financial milestones like buying a home,” said JP Kelly, senior vice president of mortgage at MeridianLink. “We are proud to provide credit unions and banks with a platform that allows them to offer personalized mortgage support, facilitate a convenient lending process, and reach more potential consumers during that initial shopping phase.”
Mortgages: A Difficult Process
In addition to focusing attention on how home prices and mortgage rates impact today’s buyers, the survey disclosed the declining confidence consumers feel throughout the mortgage process — driven in part by a lack of support from their financial institutions (FIs).
“Getting a mortgage can be a difficult, intimidating process for homebuyers who are increasingly looking for support throughout the mortgage lending process—even if that support comes from a credit union or bank that isn’t their primary financial institution,” said the MeridianLink report.
The survey results indicate the tenuous loyalty consumers have for their primary financial institutions when it comes to selecting a lender. MeridianLink suggested that some of these behaviors come down to cost and a lack of process guidance, education, and other forms of mortgage lending support.
The report referenced the Sept. 6, 2023 Mortgage Bankers Association (MBA) survey that revealed mortgage applications have declined to the lowest level since 1996. The MBA’s survey also showed the unadjusted purchase Index, which reports the number of nationwide home loan applications, dropped 28% lower than the same week in 2022. While the MBA notes low housing inventory and elevated mortgage rates as potential explanations, there may be more to the story—such as the rising cost of originating a mortgage, which can be as high as $13,000 per loan.
Tips for Lenders
This report also explored consumer attitudes and perceptions about mortgage lending, and revealed insights about the challenges Americans face when getting a mortgage. The report explained, respondents highlight the need for clearer processes, more guidance, and greater flexibility from lenders.
The challenges faced by both first-time homebuyers and those with experience purchasing a home include rapidly fluctuating mortgage rates in addition to the scrutiny of the lender they choose. The report suggested, “The entire mortgage process is onerous, and consumers are looking for help from FIs. Those that provide the necessary support and convenience will win the market—whether they are a consumer’s primary FI or not.”
Based on the insights from this study and the MeridianLink’s work with over 2,000 financial institutions, the company provided the following tips to lenders looking for ways to grow their mortgage business:
1. Make the mortgage lending process as easy to understand and convenient as possible. With so many consumers willing to shop around, creating an end-to-end experience with as little friction as possible will be critical to consumer retention.
2. Be proactive about providing consumers with offers and support that are tailored to their individual needs, or risk losing them to an institution that does. “MeridianLink Engage, the Company’s marketing automation solution, is a powerful tool that can assist credit unions and banks in making this consumer outreach as efficient and effective as possible.”