Magazine article Mortgage Banking

Mortgage Shopping's Digital Divide

Magazine article Mortgage Banking

Mortgage Shopping's Digital Divide

Article excerpt

The continued evolution of online technology tools is likely to allow consumers to more easily find the right mortgage to suit their needs. Improved technology could help mortgage borrowers find the right mix of rate, fees, risk, features and service so they experience higher long-term satisfaction with their mortgage choice. [paragraph] This, in turn, could yield significant changes to mortgage shopping on a scale comparable to what has already occurred in the travel and retail industries, where we now expect to be able to go online and relatively easily and transparently find the right product. [paragraph] Given the likely impact technology could have on the mortgage industry, Fannie Mae's Economic and Strategic Research Group collected data on this topic through two different studies. [paragraph] The studies found distinct differences in the degree to which technology was used in the mortgage-shopping process between higher- and lower-income consumers as well as between recent and non-recent mortgage borrowers.

The studies also found a shared desire among all groups to use online technology more in the future.

We define lower-income consumers as people with family incomes of < $50,000, and higher-income consumers as people with family incomes of more than $100,000.

The findings also suggest that there may be opportunities for online tools to improve the ability of all borrowers to shop for a mortgage.

In-person or online

Late in 2012, to gain a better understanding of mortgage shoppers, we collected data from an online panel of consumers. These consumers--approximately 3,600 in total--had either obtained a mortgage in the past four years or were intending to get a mortgage in the next 18 months. This study included first-time and repeat buyers as well as refinancers.

We found that technology use was one of the biggest differentiating factors among the different segments of mortgage shoppers. It was especially highlighted by differences between income groups.

Results showed that lower-income consumers are more likely to say that they prefer in-person interactions while mortgage shopping than higher-income consumers. In particular, we asked consumers about gathering information, choosing a lender and completing their application while mortgage shopping (see Figures 1, 2 and 3).

FIGURE 1
PREFERRED SOURCES FOR GATHERING MORTGAGE INFORMATION

When gathering        <  $50,000-$100,000  More than
information about     $50,000                     $100,000
mortgages or
refinancing, which
of the following are
your preferred
sources of
information?

In-person visits      48          39                31*

A visit to the        25          28                32*
provider's website

Internet sites not    13          20                24*
affiliated with
banks or mortgage
providers (i.e.,
mortgage-comparison
websites, reviews,
etc.)

Other                 14          13                13


SOURCE: Fannie Mae
*Denotes a statistically significant difference between
"< 550,000- and "more than $100.000"
at the 95% confidence level
FIGURE 2
IMPORTANCE OF IN-PERSON PRESENCE FOR CHOOSING
A MORTGAGE PROVIDER

When choosing
a mortgage
provider and
thinking
about the
provider
itself, how
important or
unimportant
is each of
the following
to your
decision?

(Showing       <  $50,000-$100,000  More than
percent        $50,000                     $100,000
extremely
important or
important)

Opportunity    69        62                52*
to meet
face-to-face
with someone

The provider   60        47                39*
has a local
branch


SOURCE: Fannie Mae
*Denotes a statistically significant difference between
'< 550,000" and more than $100,000"
at the 95% confidence level
FIGURE 3
PREFERRED METHODS FOR COMPLETING A MORTGAGE APPLICATION

What would be
your preferred
method for
completing the
final mortgage
application?

(Showing         Less     $50,000-$100,000  More than
percent)         than                       $100,000
                 $50,000

In-person with   74       64                53*
a
representative
of the mortgage
provider

Online           18       27                37*

By regular       2        3                 3
mail

Over the         3        2                 3
telephone

By email         2        3                 3

By fax           0        0                 1


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