Rates Talk. Otherwise, Borrowers Walk

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.