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Lenders React to Rate Hikes, Decreasing Demand

According to the newly released J.D. Power 2022 U.S. Mortgage Origination Satisfaction Study, 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.

New data finds that U.S. mortgage industry has gone from record volume and profits in 2021 to a 22-year low in demand for new mortgages through the first half of 2022. J.D. Power also found that mortgage providers have struggled to differentiate themselves in the eyes of customers whose expectations of the experience are rising and competition for their business is even more intense.

"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 J.D. Power. “That means ramping up communication — keeping customers informed throughout the lending process and ensuring consistent and effective communications through all channels. Unfortunately, less than one in three customers say their lenders were able to deliver that optimal experience.”

Highlights of the 2022 study:

  • Commoditized customer experience: The top- and bottom-performing lenders in overall satisfaction in this year’s study are separated by just 87 points (on a 1,000-point scale), with very little variation in overall satisfaction among the top 10 companies evaluated. Additionally, the number one reason given for choosing a specific lender is rate, which suggests that lenders may be placing too much emphasis on price, reinforcing the notion that there is little difference beyond the product.
  • Missing an opportunity: The key attributes customers are seeking in their mortgage lender are expertise; guidance; and communication. These are conveyed in the form of responsiveness, keeping customers informed, having an effective website and delivering consistent communications throughout the lending process. Currently, just 28% of lenders are successfully meeting all these key criteria.
  • Less than half of mortgage customers kept fully informed: During the lending process, there are six key moments of truth that determine whether or not the lender is viewed as a trusted advisor: providing advice on customers’ financial situations; explaining the application process; fully answering application-related questions; meeting expectations for what is required; explaining the closing process; and providing information about servicing. Less than half (48%) of mortgage customers say they were kept fully informed in all the phases of the process.
  • Appetite for digital, but most interactions still involve humans: While approximately 40% of mortgage customers indicate a willingness to complete the entire lending process via self-service digital tools, 67% are currently interacting with human representatives via phone.

“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.”

To read more information about the U.S. Mortgage Origination Satisfaction Study, click here.

To read the full report, including more information and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

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