A Mortgage Consumer’s Journey Can Provide Steady Insight In a Fluctuating Market

In the mortgage industry, market factors can have a large influence on consumer demand. Because of this, understanding consumers, their intent and their journey is critical to successfully optimize customer acquisition and marketing programs. In this blog, we will take a look at the current market conditions impacting the mortgage industry and how leading lenders are leveraging data to enable them to maintain steady insights and performance from their customer acquisition programs.

Market Conditions Have Created an Ultra-Competitive Mortgage Market

As the calendar turned to 2017, it appeared as though the interest rate forecast was becoming clearer. After increasing the federal funds rate by 0.25% last December, the Federal Reserve duplicated the action in both March and June of 2017. As a result, mortgage lenders, preparing for the end of a lengthy refinance boom, turned their focus to the purchase market to remain profitable.While expectations played out accordingly for the first half of the year, uncertainty created by tensions with North Korea and the impact of the storms that hit the Gulf coast in August, led to lower mortgage rates by the end of the summer. Despite a strengthening economy, sluggish inflation combined with other economic factors have lead the Fed to keep interest rates steady in September, breaking the trend of rate hikes following the last three quarterly meetings.But lower than expected interest rates don’t necessarily translate into another “refinance boom.”

The challenges of a shrinking market still exist, and mortgage lenders must continue to think creatively about marketing efforts aimed at attracting new customers. The Mortgage Banker’s Association Report shows that applications are down 25% compared to a year ago and the stubborn purchase market is a key contributor. Low turnover on existing homes combined with decreasing sales of new homes have resulted in a six-month low on purchase volume. As a result, lenders now face an ultra-competitive customer acquisition market and those who are able to optimize lead programs by focusing their marketing investments on those consumers who are most likely to convert will come out on top. Fortunately, there is customer journey data within this market that can help identify consumers who are the best candidates for a home loan.In fact, our data has shown that 60% of mortgage customers visit more than one third party site when shopping for a loan, providing ample opportunities for understanding who is actively in the market. Let’s take a closer look at two specific targets which marketers can focus on:

1) First-time Home Buyers

First-time homebuyers represent what is perhaps one of the more lucrative prospects for lenders. In fact, there could be as many as 17 million first-time homebuyers over the next five years, consisting mostly of millennials.First-time home buyers typically conduct quite a bit of research before making what could be the largest purchase of their lives. Research shows that millennials are comfortable with conducting 100% of their financial affairs online. These homebuyers will be creating a digital footprint that is rich with data, signaling that they are in the market and lenders need to listen.When a potential first-time home buyer visits a lender site, they bring with them a background story, in the form of their customer journey. Tapping into this journey data, in real-time, will tell a lender if a prospect has been researching home buying topics such as managing a credit profile, paying off debt, saving for a down payment, monitoring rates and spending time on competitor websites.As personalized experiences replace static websites, lenders can use this data to display related blog topics and offers that are in line with the user’s previous research. Some lenders will prioritize prospects exhibiting serious mortgage intender activity, since that activity can mean the consumer is actively engaged with their competitors.

2) Cash-out Refinance Consumers

The prolonged period of relatively low rates has provided lenders with another option to sustain volume. While the market for rate-and-term refinance loans, those intended to save borrowers money through a lower rate and/or a change in term has slowed, demand for the cash-out refinance has increased. Cash-out refinance loans allow a borrower to convert their home equity into cash.

As rates remain low and home values continue to increase and build equity for homeowners, the cash-out refinance loan presents a good alternative to other high-interest bearing financing options for those who qualify. According to Freddie Mac, the cash-out refi market has been so good in 2017 that the mortgage originations forecast was increased by over $200 billion this year and $100 billion for 2018.

Since cash-out refinance loans are mostly used to fund considered purchases – home improvement projects, paying down high-interest debt, buying an investment property or making a deposit into a college savings or retirement account – these consumers also exhibit in-market behaviors.

Home improvement projects involve researching contractors, designs and materials. Consumers interested in debt consolidation have several loan options to investigate. Online real estate resources allow consumers to search hundreds of properties to locate a perfect investment or vacation home without leaving their living room.

With all of the data related to these potential uses for the loan, lenders can learn valuable information about a cash-out refinance prospect before they even arrive at their digital doorstep. And by paying attention to the online journey that led them there, they can optimize their acquisition and marketing programs to drive a more consistent flow of leads and better conversion rates.

Be Certain to Understand the Consumer Journey

Market conditions are constantly in flux. Currently, global unrest, natural disasters and politics are continuing to throw curve balls at the Federal Reserve, creating unexpected opportunities in the mortgage industry while curtailing markets that lenders relied on for the past several years.However, one certainty is that as digital mortgage applications and online research continue to become more prevalent. As a result, loan agents will have fewer chances to directly interact with prospects, address their needs and make a case for lending with their organization.In order to be successful, lenders must learn to utilize customer journey data to help them understand the customer and address their needs before they ever ask. Marketers and organizations who can do this effectively will enable their lead generation programs to achieve a higher rate of success, even through volatile market conditions.