After years of mortgage interest rates hovering in the basement, we’re now seeing those numbers climb. Exactly how far they’ll go, no one knows. Regardless, homeowners and potential homebuyers will likely react to the shift. How can your financial institution adjust its mortgage marketing strategies to take advantage of that shift in terms of maximizing customer acquisition and retention — and achieving profit goals? CCG Senior Vice President, Financial Strategist, Greg Sultan shares his thoughts.
Today’s Mortgage Interest Rate Environment
“As mortgage interest rates rise, the general expectation is that refinance activity and adjustable rate mortgage (ARM) activity will both decline,” says Sultan. Statistics from the Mortgage Bankers Association (MBA) are already bearing out that prediction and, in fact, showing a general drop-off in mortgage activity.
Here are the MBA figures from February 22, 2017 (based on seasonally adjusted figures):1
- The Market Composite Index (measuring total mortgage loan application volume) dropped 2 percent over the previous week.
- The Refinance Index decreased 1 percent from the previous week, hitting its lowest mark since January.
- The refinance share of overall mortgage activity decreased to less than half (46.2 percent) of total applications — its lowest figure since November 2008.
- The Purchase Index decreased 3 percent from the previous week, marking its lowest point since November 2016.
- Adjustable rate mortgage activity dropped to 7.3 percent of total mortgage applications, even though the average contract interest rate for a 5/1 ARM dipped very slightly from 3.34 percent to 3.31 percent.
- Meanwhile, the average contract interest rate for a 30-year fixed-rate mortgage increased to 4.36 percent (from 4.32 percent) for conforming loan balances and to 4.29 percent from 4.28 percent for jumbos.
Mortgage Marketing Strategy #1: Home Equity Products
“Along with rising mortgage interest rates, home prices are expected to make slight gains in 2017. That means equity will likewise increase for many homeowners,” says Sultan. “Consumers looking for financing solutions may find the relatively lower rates on home equity loans and lines of credit an attractive option to rising credit card rates. Lenders should plan to ramp up their home equity campaigns.”
Use data to identify individuals with equity.
“One of the first things a bank can do to adjust its mortgage marketing strategy is leveraging data to identify people who have available equity in their homes,” says Sultan. “At CCG, we then use that data in models that allow us to estimate an individual’s current mortgage balance — even if that person isn’t your customer — so you can target a message based on a realistic available equity figure.”
Assess credit risk without the bureaus.
“Anyone involved in bank marketing, and particularly home equity or mortgage marketing, knows the requirements — and related challenges — of screening prospects through the credit bureaus,” says Sultan. “But CCG has recently introduced a new Credit Quality Score (CQS) that uses public data to provide a risk assessment without using the bureaus, while still complying with fair lending.”
Using this CQS score, you can identify lower-risk prospects for your bank marketing messages. Yet, you may also be able to increase your mailing universe, since you can reach people who have opted out of credit solicitations through the bureaus, Sultan explains. And since those prospects aren’t receiving other marketers’ communications, your offers have a better chance of standing out and netting a response.
Use marketing campaigns to educate homeowners on their home equity.
“Most home equity offers focus purely on rate,” says Sultan. “But it’s more powerful and more meaningful to the customer when you inform them how much equity they may have and how much it will cost them to access those funds.”
In addition, it’s always a good idea to remind prospects of the potential benefits and uses of their home equity. Remember to spell out “what’s in it for them” rather than just offering a generic list of features.
Mortgage Marketing Strategy #2: Purchase Mortgages
“Purchase mortgages will become a larger share of the total mortgage pool as refinance activity slows,” says Sultan. “As with home equity marketing, lenders should become more efficient in promoting their mortgage programs, leveraging their data to better target their audiences and their messaging.”
Here are three steps your bank can take to strengthen its purchase mortgage marketing campaigns:
- Traditionally, you’ve probably used credit bureau data to identify people who have recently applied for home loans. A newer alternative is to use pre-mover data, which lets you identify potential home sellers (and buyers) sooner.
- By communicating with prospects before they’ve applied with a competitor, you gain an advantage, explains Sultan. For one thing, it extends your marketing timeline, giving you more opportunity to develop a comprehensive multi-channel mortgage marketing strategy that includes direct mail, email, outbound telemarketing and the web.
- When it comes to your mortgage marketing messages, it’s important to be aggressive with offers, says Sultan. “For instance, offer a $100 gift card when a new customer is approved for a mortgage.” But there is also value in educating people about the mortgage process, he adds. “Help them understand how to review their credit reports and credit scores — and how those affect their interest rate. Provide a checklist of tasks to complete before applying for a mortgage. Explain what they can expect from application through closing. Anything that makes the process less intimidating and confusing.” You can distribute this content through print brochures, on web pages or via an opt-in email series.
Mortgage Marketing Strategy #3: Consider Retargeting
“It’s really difficult to target people on digital devices when you’re running a pre-approved mortgage campaign. Legally, you have to make a pre-approved prospect a firm offer of credit, which is hard to do in digital media, so you still have to send direct mail,” says Sultan. “Invitation-to-apply campaigns offer more flexibility in targeting people with digital media. And that opens the door to CRM retargeting opportunities.”
Retargeting, you may know, is when you’ve been perusing products on a particular website and suddenly see ads for that product pop up wherever you are on the web. CRM retargeting goes a step further by allowing you to use offline touchpoints to identify prospects, and then deliver online ads to them at an individual level. Retargeting is a fresh and innovative way to maintain communications in an online environment with prospects, regardless of whether they’ve been reviewing mortgage products on your website, talking on the phone with one of your loan reps or visiting their local branch in person.
Keeping Your Mortgage Marketing Strategies in Tune with Changing Interest Rates
In the coming months, we’ll undoubtedly see the economy fluctuate — and rising mortgage interest rates will be a critical part of that activity. The mortgage lenders who will thrive in this environment will be the ones who can stay nimble with their mortgage marketing strategies and be willing to innovate. The bank marketing strategies above can help put your financial institution in a strong position to weather the potential turbulence.
We can help! CCG has 40 years of experience assisting financial institutions in acquiring and retaining customers, achieving their goals and increasing their bottom line. Our financial services include strategy, data, analytics, content and creative.
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1. “Mortgage Applications Decrease in Latest MBA Weekly Survey,” Mortgage Bankers Association press release, posted Feb. 22, 2017, https://www.mba.org/2017-press-releases/february/mortgage-applications-decrease-in-latest-mba-weekly-survey-x165735, accessed Feb. 27, 2017