Back in the 1940s (I know … the 1940s … when does an article open with that?!), a potential home buyer would head to the local bank to apply for a mortgage. In the 1960s onward, mortgage lenders entered the market and started for the audience. The post-Vietnam post war generation needed a bit of hand-holding to achieve home ownership. Internet-based lending entered the scene in the 1990s and adoption was low. However, buyers did use it for pricing and decision-making purposes. We saw adoption of internet-based lending increase in 2000, and now it’s hard to imagine the home buying process without the internet.
Given your generation, home buying process expectations are widely different.
|GENERATION||BIRTH YEARS||PERCENTAGE OF HOMEBUYERS|
According to the 2021 NAR Home Buyer and Seller Generational Trends Report, in 2021 87% of recent buyers financed their home purchase: 97% or more of buyers 40 years and younger financed, whereas only 69% of buyers aged 66 to 74 years financed their home, and 54% for buyers 75 years and older.
Buyers are Increasingly Finding Their Homes Online
There is a direct correlation between the age of the homebuyer and their likelihood of going online to achieve home buying success. The younger they are, the more likely they are to go online and the less likely they are to use a real estate agent. Conversely, the older they are, the less likely they are to go online to buy a home and the more likely they are to use a real estate agent. In 2021, the youngest home buyer age bracket of 22 to 30 saw 61% of home buyers search online versus 24% with a real estate agent. Meanwhile, the highest age group 75 to 95 saw 30% of buyers look online versus 38% with a real estate agent. This trend is consistent across all age brackets and suggests that over time the demand for online mortgage and home buying services will increase.
The Trend is Toward Online Mortgage Pre-Qualifications and Applications
There is also a direct correlation between the age of the home buyer and how likely they are to conduct their loan process online. Ages 22 to 30 saw 34% of buyers get pre-qualified for their mortgage online versus 15% of those 75 to 95. This trend is consistent throughout age groups. Moreover, 30% of those ages 22 to 30 applied for a mortgage online versus 11% in the age bracket 75 to 95 – and 18% of those ages 22 to 30 found a lender online versus 8% of those ages 75 to 95. All of these behavioral trends are consistent across generational groups demonstrating up and coming generations’ preference for doing as much of the home buying process online as possible.
Building Long-Term Bank Loyalty Requires the Correct Online and In-Person Hybrid Model
In 2021, people’s most scarce resource is their time. They are increasingly accustomed to conducting many of their routine tasks online, from scheduling appointments to paying bills. Moreover, they consume much of their entertainment online, via streaming services and social media. This is a double-edged sword and mortgage businesses need to navigate this thoughtfully. While they need to provide streamlined systems that allow clients to complete the mortgage process online, they also need to offer a personal human touch by interacting with customers in person and over the phone. Approaching the customer service experience with some analog elements will allow mortgage companies to stand out from the noise of the virtual information highway and will generate long-term loyalty from customers.
Millennials are Changing the Real Estate and Mortgage Business
According to a recent study by the National Association of Realtors, 99% of Millennials, a group ranging from age 22 to 40, use the internet to achieve their home buying. This may not be surprising, but that figure is nearly double that of Baby Boomers. Technology has become crucial in the home buying process, and patience for low technology systems is waning. Millennials like options and efficiency, and using the internet to achieve their goals has democratized the home buying and mortgage shopping process.
Online Mortgages are the New Normal
According to a 2020 study by industry research firm Inside Mortgage Finance, six out of the top ten lenders were non-banks. This is their highest market share to date and is astonishing when one considers that only a few decades ago, the traditional way to get a mortgage was to walk into a bank and develop a relationship with a banker in person. Historically, buyers would ask their real estate agent for a referral to build that banking relationship. Now they simply ask Google.
The Future is Faster Speed, More Competition
On average, Millennials obtain six mortgage quotes versus the Baby Boomer group that only obtained three mortgage quotes. On average, 86% of this younger home-buying group shopped around for a mortgage versus 55% of the older age group. This trend is only going to increase as the tech-savvy generations expect speed and have little patience for outmoded systems. To capture their attention, mortgage companies must streamline their process and cater to the rising generation of home buyers and their preferences.
How Can You Compete?
Focus on the borrower's experience. Have your high-value employees perform the highest value tasks. Consider outsourcing or automating the rest. Have you heard about an HPA calculation? It stands for High-Performance Activity and it can help you break down which hours of the day your employees’ work corresponds with the highest value tasks. You can read more about it here.
The marriage of technology and relationship building will make your mortgage business succeed.
If you want to know more, contact our team below.