Lenders Struggling To Overcome Borrower Rate-Fixation Need To Focus On Communication

As the market corrects and mortgage demand sinks, lenders are struggling to market themselves to a shrinking pool of rate-focused borrowers, according to J.D. Power’s latest U.S. Mortgage Origination Satisfaction Study.

The study found that as demand hits a 22-year low, mortgage brokers are finding it difficult to stand out from the crowd. Borrowers are choosing lenders based solely on who is offering the lowest rate that day.

“The average mortgage customer experience has become increasingly commoditized, with few lenders finding the right formula to build long-term trust and loyalty that truly stands out from the competition,” the report reads.

Rocket Mortgage ranked highest for origination satisfaction, followed by Chase, Citi, and Fairway Independent.

Overall, lenders were on equal footing when it comes to customer satisfaction. The best- and worst-performing lenders were only 87 points apart on a 1,000-point scale. That means brokers trying to attract clients must overcome a big pool of similar competition.

But there is room to grow. The study found that only 28% of lenders are meeting the top three attributes borrowers seek: expertise, guidance, and communication.

Focusing on responsiveness, having an effective website, and communicating clearly and consistently throughout the lending process can give brokers a boost in client satisfaction.

“There is no denying the effects of rising interest rates on mortgage demand, and this is precisely the time when lenders need to differentiate themselves as trusted advisors who can guide customers through the lending process and offer valuable counsel along the way,” said Craig Martin, executive managing director and global head of wealth and lending intelligence at J.D. Power. 

“Unfortunately, less than one in three customers say their lenders were able to deliver that optimal experience.”

Less than half of respondents said they were kept fully informed through the lending process, especially in key areas such as advice on customers’ financial situations, explaining the application and closing processes, and providing information about servicing.

Even though interest in fully-digital lending is growing, most borrowers are still interacting with human representatives on the phone. This provides an opportunity for lenders to build trust and loyalty through effective communication.

“A rising tide of record demand and historically low interest rates hid a lot of the challenges lenders have been facing in forging more meaningful, lasting connections with customers and moving beyond a transactional, rate-driven relationship,” said Tom Lawler, head of consumer lending intelligence at J.D. Power. 

“Now, as the macroeconomic situation has reversed course, these relationship-driven attributes have become critical for lenders that want to convey a more unique value proposition and build more lifetime customers in a highly competitive marketplace.”