Until the 1990s the overwhelming majority of mortgage customers approached lenders directly and transacted through a branch. This model has already been transformed as over 70% of customers now source their loan through an intermediary when changing lenders.
Leading consumer trends in digital mortgages
Listed below are the leading consumer trends in digital mortgages, as identified by GlobalData.
Many consumers are excluded from the market
Many people are employed in the gig economy or are entrepreneurs. For such individuals, stable monthly incomes are difficult to get and even harder to prove. Others lack funds to get onto the property ladder. Many risk models discriminate against women, because historically they did not work or only worked part-time. In the US, traditional lenders deny black and Hispanic mortgage applicants at significantly higher rates than white applicants, according to a recent report from the Center for Investigative Reporting.
Branches and existing relationships drive selection
The mortgage is the product people are most likely to buy in branch, or because a provider has branches nearby. The second biggest determinant of provider is whether the customer has a pre-existing relationship (i.e. a current account with the bank). However, their initial research process and decision-making often starts online, meaning many customers have already decided what they want to buy by the time they reach the channel where the bank is best equipped to “sell” to them. This risks relegating branch networks to expensive transaction processing.
Customers are more empowered
Customers are more empowered than before. They can compare and contrast products from different providers and manage their financial lives independent of any one provider through API-enabled account aggregation. Testament to this, customers are more likely to hold multiple financial products and be less “sticky”. As per our research, 27% of European customers indicate they are very likely to switch mortgage provider in the next 12 months, rising to 34% in Asia Pacific.
Digital experiences outside of banking raise expectations. Amazon generates personalised “people like you” product recommendations. Apple offers “one click” checkout. Even inside financial services, customer-centric innovation has driven profound change across payments, money management, and lending. Yet buying a house – the biggest financial commitment of most peoples’ lives – remains an antiquated experience organised around outdated bank processes and regulation, not customer needs.
More first-time buyers
In the UK, 70% of first-time buyers are millennials, most of whom are very comfortable using digital channels. 57% of millennials stated that if they were applying for a mortgage today, they would choose a digital channel. However, even among this demographic, proprietary bank channels – branch, online – are still important. This is testament to just how enduring banks’ reputation as a trusted adviser is. Some 37% of millennials indicate they would opt to speak with a bank representative in-branch.
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