Most mortgage borrowers don’t shop around for a lender, according to a survey conducted by FREEandCLEAR. In fact, 36 percent of borrowers only looked at one lender when buying their home, while the remaining 64 percent only compared two.
As FREEandCLEAR put it, “A significant number of borrowers may be leaving money on the table by not shopping around.”
According to the survey results, the reason for the lack of research is likely because of referrals and existing relationships. Nearly 80 percent of borrowers used their existing bank, a referral from their real estate agent, or a personal referral when choosing a mortgage lender. A mere 9 percent used an internet search.
Michael Jensen, Co-founder of FREEandCLEAR, said this shows it’s not just the industry that’s slow to adopt tech—but buyers themselves.
“We knew the mortgage market lagged other industries in terms of Internet adoption but we were shocked to see just how ‘old school’ the lender selection process is for most borrowers,” Jensen said. “It’s a significant opportunity for lenders and other industry participants.”
When weighing lender options, the survey also found that buyers consider interest rates the most important—even over other factors like APR, low monthly payments, personal recommendations, customer service, or up-front closing costs.
“The survey findings reaffirm that borrowers are keen to keep their interest rate and monthly payment low when they select a mortgage lender,” FREEandCLEAR reported. “Other decision-making factors such as a customer service and lowest closing costs lagged in comparison, garnering only 7 percent and 4 percent of responses respectively. These results suggest that borrowers may be willing to pay higher closing costs, potentially including discount points, and put up with lackluster customer service to achieve a lower mortgage rate.”
As far as lender type goes, half of all borrowers contacted a “big bank” when securing their mortgage. Just under 40 percent looked to local banks and mortgage brokers, while credit unions and mortgage banks came in last, with just 28 percent and 23 percent of buyers making contact.
“While the mortgage landscape is changing as specialized mortgage banks gain greater market share at the expense of large national banks, the FREEandCLEAR Mortgage Survey shows that borrowers are still turning to the big banks when they shop for a mortgage,” FREEandCLEAR reported. “Although the big banks may be losing mortgage market share they still hold mind share with borrowers.”