Lenders need the right tools, expertise to serve both the digital and traditional consumer.
Still think Millennials aren’t your target market? Think again. Yes, today’s younger generations have been slower than their parents and grandparents to partner up and settle down, but the largest generation in history is growing up. In 2018 Millennials made up the largest share of homebuyers in the country, at 37%, according to the
At the same time, their Baby Boomer parents are also on the move. Boomers, age 54 to 72, made up nearly a third (32%) of all homebuyers in the NAR study. With both ends of the generational—and digital—spectrum making up more than two-thirds of all home buyers, mortgage lenders have a new challenge: Balancing automation with the need to serve both the digital and traditional consumer.
Bridging the Generation Gap
Like the Baby Boomers before them, Millennials are changing, well, everything. As the first fully “digital native” generation in history, Millennials are redefining even the most basic human interactions. Consider the word, “friend.” Because younger generations are more comfortable connecting online than in person, it’s not uncommon for someone to claim hundreds, if not thousands, of “friends” from all over the world—many of whom they’ve never even met.
Their need for instant gratification is legendary. They aren’t waiting for Thursday night to watch their favorite shows. They expect to be able to access anything they want any time they want using any device they happen to have in their hand. (And they always have a device within reach.)
This need for constant contact includes applying for loans. They are not going to pick up a phone to research mortgages, much less walk into an office to fill out paperwork. A “like” on social media equals wanting to apply for a loan within minutes.
Boomers Want Convenience, Conversation
Most homebuyers, regardless of age, want the convenience of a digital platform. A
Still, when it comes to applying for a loan, most Boomers prefer a personal connection. The same Ellie Mae research found that only 24% of Boomers initiated contact with their lender online, compared to 43% of Millennials.
That’s because, at the end of the day, older generations really want to talk to a human being. They ask more questions and are more cautious about how they spend their money, and they are more reluctant to divulge personal information. They’re not likely to hand over their banking information digitally before talking to someone in person.
The Digital Advantage
Reaching both of these demographics is critical, but higher costs and softening demand are squeezing profit margins and limiting opportunities for mortgage lenders. The average cost to close a mortgage loan rose to
Things weren’t looking any better in 2019. Through the first quarter of 2019, mortgage lenders had a negative net profit outlook for the rest of the year, according to
That’s where technology comes in. Research shows that new digital tools can help lenders improve efficiency while reducing risk. A 2018 report from the
The same Fed report also found that the default rate on tech-based loans were 25% lower than for traditional loans. Another advantage noted in the report is that tech-driven mortgage lenders were more flexible in responding to changes in market demand.
Meeting Customers on Their Terms
The right technology can help support legacy lending practices by automating the paperwork while still providing personal support with a trusted loan officer. For example, for consumers who prefer using paper applications, scanners and bots can quickly translate that information into a digital platform.
Still, the overarching 80/20 rule applies to each generation. To balance that equation, lenders need experts who can answer questions intelligently for the 20% of the market that is not moving to a digital platform. Those same loan officers, though, also need access to the tech tools that younger homebuyers demand.
According to PwC’s 2018 report,
