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Rates Talk. Otherwise, Borrowers Walk

Lenders need to get more creative to keep price-sensitive mortgage shoppers.

Lew Sichelman headshot
Lew Sichelman
Walking out
To most borrowers, it’s about dollars and cents and little else.

It’s all about the Benjamins.

Relationships matter, “but price matters more,” according to a recent consumer lending survey from Nomis Solutions, a fintech focused on value creation for lending institutions of all sizes.

In other words, to most borrowers, it’s about dollars and cents and little else. Especially nowadays when shopping for a home loan is as easy as hunting on-line for the best deal on a new refrigerator. “Consumers can easily see and shop for rates,” the report says. “They have gotten savvier overnight and shop for mortgages like they are shopping for clothes.”

Hell, some retailers even have programs that search their competitors web sites for lower prices. And if such a price exists, the retailer will match it.

It’s doubtful whether mortgage makers will ever go that far. But if they don’t grab for the brass ring right away, would-be borrowers are likely to go on to the next one and the next one after that, on down the line, until they find the lowest rate, or at least one that’s fits their needs.

What’s The Cost

In its survey of 500 consumers who applied and were approved for a home loan within the previous 12 months, Nomis found price was the top driver, with 36 percent saying low rates was the primary reason for selecting the loan they did. On the other hand, their relationships with their primary banking institutions mattered hardly as at all.

Ease of application and quick access to funds also were important factors, cited by 27 percent and 23 percent respectively. But mostly it was all about money. 

“In today’s competitive lending environment, where interest rates are continually in the news cycle, consumers are focused on securing the lowest possible rate as they select a loan product,” the Nomis report said.

Cost even trumps – Lord, I hate using that word – relationships. Oh, relationships matter. But asked if they would ditch their primary bank if they could find less expensive financing elsewhere, most – a whopping 78 percent – would jump ship in a New York minute. Asked another way – would they be willing to pay more for a mortgage – 70 percent said no, they wouldn’t, thank you very much.

This, despite the fact that most respondents said they have been with their primary banks for years, at least five in most cases. And most said they trust their banks far more than on-line lenders and search engines such as Google or Amazon.

That’s some serious stuff, says Nomis. “Banks should not be complacent about their hold over customers,” the report warns.

Savvy Shoppers

The study also found that mortgage borrowers are comparison shoppers. Just 31 percent of the loan applicants queried said they considered a loan solely with their primary banks. The rest looked around, to at least two different lenders, including lender comparison websites and those lenders who exist only on the Internet.

Here, Nomis, whose platform is an end-to-end, customer-centric pricing engine, offers the commercial you’d expect from the outfit which paid for the survey. Nevertheless, its suggestion rings true. To capture customers and deter them from shopping around, engage in a form of “couponing.” Not the buy one, get one free variety, because they only want one loan. Rather, promotional pricing, say an offer that expires at the end of the month or one that appeals to their particular age group or sex.

Gimmicks don’t seem to cut it, though. Special non-price incentives offered by the lenders were important to only 8 percent of the survey respondents. “You have only one shot, so make it your best,” said Joe Zeibert, the company’s managing director of global lending solutions.

Non-Stop Comparisons

But even after you’ve made your best offer, even after a borrower decides to apply with you, it doesn’t necessarily mean he has stopped looking around for another. Even after they’ve been approved, 31 percent said they continued to shop for a better rate. And 41 percent said they’d actually change horses in midstream if something better came along.

“Why not?” the study remarks.

Why not, indeed!

A couple of other takeaways worth mentioning from the Nomis report:

  • People don’t seem to have as much faith in newcomers to the mortgage business.
    Asked to rank a wide range of loan providers, conventional lenders – national and regional banks, community banks and credit unions – scored higher on the trustworthiness meter than on-line lenders.
  • Access to live human “experts” is still important to a minority of borrowers.
    Most applicants prefer a mix of digital and in-person applications. But 20 percent want a head-to-head meeting. Digital, however, is the preferred means by which people want to submit such key documents as pay stubs and tax returns.
This article was originally published in the NMP Magazine May 2021 issue.
Lew Sichelman headshot
Lew Sichelman,
National Mortgage Professional Contributing Writer

Lew Sichelman has been covering the housing and mortgage sectors for 52 years. His syndicated column appears in major newspapers throughout the country. He also has been the real estate editor at two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.

Published on
May 31, 2021
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