Among today’s prospective mortgage shoppers, neither interest rates nor bank size were the most important factor used in deciding on which home lender to select.
The most important attribute that influences a prospective borrower’s choice about a mortgage is the interest rate structure, with 36 percent of consumers indicating this.
Almost seven-in-10 consumers consider a fixed rates to be a necessity when mortgage shopping. This trend was more pronounced among older consumers than younger.
Those details and more were spelled out in Pricing innovation in retail banking – The case for value-based pricing from the Deloitte Center for Financial Services.
Findings were derived from a survey of 3,001 bank consumers.
Just over a quarter considered the interest rate the most important factor, while a similar share identified the loan term as having the biggest influence on them.
Fourth on the list was origination fee, then the type of lender, down payment and special offers. Less than 10 percent valued closing costs and variable-rate reset periods most.
The size of a bank or its brand recognition was of little value to consumers, who “were ambivalent regarding mortgages from large, mid-size and community banks.”
The report recommends that home lenders’ marketing efforts emphasize the competitiveness of their offerings and not relationships because consumers don’t care about existing relationships.
Deloitte also suggests that lenders reduce the sensitivity to origination fees by bundling other services, like appraisals, surveys and title examinations to increase customer convenience.
One recommendation was to make cross-selling central to mortgage pricing. Deloitte noted that the weak return from mortgages could then be offset by savings in acquisition costs from lucrative products.
“Compared to specialty mortgage lenders, banks generally hold one crucial advantage — a large portfolio of products through which they can enhance customer profitability,” the report stated.
But such practices have recently come under fire after it was revealed a culture that pressured Wells Fargo Bank, N.A., employees to cross-sell bank products motivated the creation of more than 2 million fraudulent account by former employees.
