Last Updated on May 2, 2024 by Luke Feldbrugge
Top lenders who are watching consumer trends in mortgage lending are embracing opportunities. In mid-April, mortgage rates rose above 7%, and according to Freddie Mac’s April 25th Primary Mortgage Market Survey, the rates continue to increase.
A variety of factors impact borrower trends in mortgage lending, including the economy, social and demographic shifts, advancing technologies, and market conditions. As Freddie Mac’s Chief Economist Sam Khater noted, motivated homebuyers are moving forward even in what continues to be considered a seller’s market.
“Despite rates increasing more than half a percent since the first week of the year, purchase demand remains steady. With rates staying higher for longer, many homebuyers are adjusting, as evidenced by this week’s report that sales of newly built homes saw the biggest increase since December 2022,” said Khater.
For proactive loan officers looking to grow their business, real opportunities exist if they are willing to personalize service and offerings, especially among younger Generation X (Gen X) and Generation Y (Gen Y) prospects.
What are the Latest Consumer Trends in Mortgage Lending?
While trends change, we do know that homeownership remains important, and younger Americans value it. According to the National Association of REALTORS® (NAR), 82% of buyers see homeownership as a financially sound investment, and this rises to 86% with younger Gen Ys (25-33 years old).
“The universal value of owning a home transcends every generation, serving as a cornerstone for both personal prosperity and community development,” says Kevin Sears, 2024 NAR president.
Opportunity knocks for lenders who are in touch with consumer trends in mortgage lending. For borrowers, lending has always been where the human touch matters. Our recent blog, How Online Mortgage Application Technologies Benefit Loan Officers, discussed the importance of the “high tech and high touch” combination, meaning loan officers leveraging technology and their personal know-how to best serve borrower prospects and clients.
Traditionally, mortgage lenders who listen, understand and truly serve, win more customers. This remains a constant.
Clear, Timely, Client-Focused Processes and Communications
For borrowers, this means openness, responsiveness, and customized offerings.
Transparency and Clarity
Borrowers want lenders who can clearly explain the lending process from start to finish in simple, understandable terms. It can be an overwhelming and stressful process, and they want to know what to expect at each stage of the process. Borrowers also appreciate lenders who make added resources accessible and available for them to better educate themselves.
Timely Communications
Technology is a loan officer’s friend when it comes to enhancing their communications game. From texts, emails, and phone calls to online portals where chatbots and virtual assistants offer around the clock customer service, these tools make it easier for lenders to deliver prompt responses, proactive updates and keep borrowers in the loop. But all these tools combined do not completely replace face-to-face interaction in the minds of borrowers.
Personalized Service
Service that shows the lender understands the specific needs of the individual borrower can win the day. From tailored loan options, to scheduling flexibility to understanding borrower needs such as financial literacy education priorities, these things build trust and improve relationships.
Financial Caution in Uncertain Times
Understanding borrower behaviors allows mortgage lenders to better cater to their needs. As discussed, home ownership is part of the dream for most Americans and with affordability being the biggest obstacle, 69% of recent survey respondents said they are willing to make some sacrifices to achieve affordability – from downsizing, moving out of state or farther from family, purchasing a fixer upper or getting a housemate. These are variables lenders should consider.
Borrowers are keenly aware of high interest rates and inventory shortages, but many still want a home despite the challenging economic conditions.
Student loan debts, especially since pandemic repayment pauses ended, and high rental costs have led to decreased savings and financial caution for younger generations. Consistent with this cautious tone, the most important factors to borrowers in choosing a lender are the best possible interest rates, loan approval assurances and overall customer service. Understanding loan options that might work, such as FHA loans and down payment assistance programs, to assist borrowers in their individual circumstances and catering to these needs will attract clients.
Who is Buying in These Challenging Times?
Experian recently examined first-time homebuyers and the growth potential this market segment offers mortgage lenders. Experian’s research revealed that close to 70% of first-time homebuyers are in their early 40s and younger, and over 86% of first-time homebuyers are purchasing single-family homes with the intent to stay longer in their home.
Interestingly, there seems to be a significant rise in the number of first-time homebuyers in the new construction market as they learn new construction homes may come with buyer incentives, energy efficiency options and lower overall maintenance costs.
Accommodating Varying Needs and Priorities
Consumer trends in mortgage lending reveal borrowers are an eclectic group. Borrowers are looking for mortgage lenders catering to the broader audiences like:
- Single Buyers – 29% of all homebuyers in 2023 were single men and women, with over 50% percent of the important Gen Y market being single and just over 30% of Gen Z buyers being single women.
- Multigenerational Households – In 2023, 14% of all buyers bought homes appropriate for multiple generations under one roof, holding constant since before the pandemic. The number of families living in multigenerational households increased fourfold between 1971 and 2021.
- Shared Ownership – An increasing number of younger Americans are open to buying a home with friends.
- Lifestyle Priorities – From wide open spaces to community offerings to smart tech home features to smaller size homes, diversity in priorities exists.
Beyond Affordability, Value Matters
While affordability remains important, value is what attracts borrowers. This presents a lender opportunity. Mortgage lenders leveraging their knowledge of the financials, and consumer demands, will be in a prime position to attract first-time buyers and long-term loyal customers.
Join Homes for Heroes – Be the Lender Heroes Want
Homes for Heroes can help you specialize in your market and grow your mortgage lending business by focusing your services on helping your local heroes buy or refinance a home. You can offer them something special, something beyond the transaction, by saving them money as a way to thank them for their service.
Simply register and schedule a time to learn more about the benefits of being a Homes for Heroes local market specialist and become the lender your community heroes want to work with for their mortgage needs.
