Are you prepared to respond as borrower demand shifts?

Fluctuating interest rates and a fast-changing market 

Last month, we saw the Federal Reserve deliver their long-awaited decision to lower interest rates with a 50 basis points cut, and 30-year mortgage rates reached as low as 6.08% according to ICE’s 30-year fixed conforming rate index. This increased refinance incentive, and mortgage applications reached their highest level in more than two years—surging by 11% according to the Mortgage Bankers Association in the week following the rate cut. Just as quickly, rates rose again due to the influence of other economic news, and within two weeks, the number of people eligible for a refinance dropped by 20%. In today’s rapidly changing market, what may be an opportunity one day could be gone the next; and we can expect this to continue until rates find their equilibrium. This is why it’s critical to have the tools and processes in place to nimbly react to and capitalize on market shifts as they happen.

Remaining diligent to identify opportunities

Affordability challenges spurred by rising home prices and stubborn interest rates are impacting both prospective borrower and homeowner behavior. As a result, many potential buyers, along with current homeowners looking to refinance, are sitting tight in the hopes that rates will eventually drop. Recognizing this, savvy lenders have been making efforts to both simultaneously build their pipeline with new business and nurture their existing book of business. By doing this, they position themselves to be top of mind for both prospective borrowers and current customers when these pockets of opportunity arise.

While retaining existing customers should remain a key priority, as interest rates fluctuate, lenders should be prepared to support an increase in new business for refinances, purchases and home equity lending. By examining their customer acquisition and retention strategies, they can drive, capture and convert shifts in demand into closed sales. 

Over the past two years as volume decreased, lenders turned to third party lead aggregators that often came at a high cost to their profit margins. However, as demand picks up, existing customer portfolios can become either one of their biggest sources of volume, or a potential cause for concern. When rates drop, retention becomes more difficult, and the market tends to favor consumer-direct lenders promoting more attractive refinance or HELOC rates. According to data from the ICE Mortgage Monitor, mortgage servicers across the industry saw refinance retention in the second quarter fall to the second-lowest point in 17 years.

On average, just one out of five homeowners who opted to refinance were retained by their original lender. Moreover, the older the loan, the more likely the borrower would refinance elsewhere. The more recent the relationship, the more success servicers had in retaining the business; with the Mortgage Monitor finding that 41% of 2023 and 34% of 2022 borrowers retained. Bottom line: As homeowners look to save on their mortgages, competition will be fierce to keep that business.

Three key steps to take now

So how do you prepare for the upcoming battle for market share? We recommend investing in three key aspects of your customer acquisition strategy to ensure you have the technology, people and operational workflows needed as rates change and volumes increase.   

• Lead nurturing – At a minimum, lenders need a marketing automation platform that can nurture prospects and customers until they are ready to buy. As rates change, this platform should also be used to quickly engage contacts with compelling, interest-driven and personalized communications. Doing this involves upfront audience segmentation within a CRM system like ICE Surefire, and creating unique, relevant and engaging content.
• Lead engagement – The ability to identify and quickly engage prospective borrowers as soon as buying intent is detected is arguably the most important facet of sales success in a lower rate environment. According to ICE research, contacting potential borrowers within one minute of an inquiry more than doubles the conversion rate, compared to contacting them 48+ hours later. Equally important is the ability to proactively and automatically detect within an existing customer database who is ready to buy, so loan officers can reach out to those borrowers before they even act. Sales automation solutions like ICE Velocify help them connect with borrowers faster and stay one step ahead of the competition. 
• Lead capture – Once a loan officer engages with a prospective borrower and their interest in exploring financing is confirmed, inviting them to apply for a loan helps create borrower “stickiness” by moving them forward in the process, bringing them one step closer to pre-approval. To earn the borrower’s loyalty and trust, the digital application experience must be as intuitive and efficient as possible. Point-of-sale solutions, like ICE Encompass Consumer Connect, provide a faster, simplified and transparent digital mortgage experience, with minimal involvement from the loan officer.

How your technology partner can help

Having nimble technology is critical for capitalizing on market dynamics. When selecting a technology partner, look for one who can support and provide visibility into every step of your customer acquisition and retention strategy. At ICE, we’re investing heavily in creating the industry’s most unified customer acquisition solution as part of our end-to-end digital ecosystem. With this innovative approach, our clients can better identify prospective customers, improve responsiveness to inbound inquiries and take advantage of every uptick in potential volume. No matter which partner you work with, now is a crucial moment to assess your current customer experience and strategically position yourself for success, so you are ready to seize every opportunity in the face of the next market shift.

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