According to the Mortgage Bankers Association (MBA), refinance volume currently represents almost two-thirds of all mortgage application volume. As the competition to connect with the pool of eligible homeowners seeking refinance loans heats up, it is important for lenders and mortgage marketers to know the factors that influence consumer behaviors related to loan decisions.
Younger homeowners are a particularly important consumer segment for lenders to understand, effectively target and engage with. To help mortgage marketers better understand consumer motivations and the latest trends surrounding refinance loan volume, in April Digital Media Solutions (DMS) surveyed 250 homeowners, ages 18 and older across the U.S.
1. Gen Z & Millennial Homeowners Seeking Refinances Are Most Influenced By Desire To Secure Lower Mortgage Interest Rates
According to DMS survey data, the top reason homeowners ages 18 to 34 consider a mortgage refinance is to secure lower interest rates. In fact, more than half (56.9%) of the Gen Z and Millennial homeowners surveyed were motivated to refinance for lower interest rates, while only 34.3% were interested in refinance to lower monthly mortgage payments. Similarly, when making their final refinance loan decisions and choosing lenders and loan programs, Millennial and Gen Z homeowners stated they were most likely to select offers that help them secure the lowest interest rates. Therefore, Gen Z and Millennial homeowners may be less motivated by incentives like closing fee or appraisal discounts.
2. During The Research Stage, Gen Z & Millennial Homeowners Value Websites & Intend To Identify Multiple Refinance Loan Options
Data from the DMS consumer survey revealed that, when initiating refinance loan option research, Millennial and Gen Z homeowners rely on websites as their primary resources. Specifically, bank websites and interest rate comparison websites are relied on by half of the younger homeowners surveyed. In comparison, just one-third of homeowners ages 35 to 64 relied on similar online tools for their refinance loan research. The older homeowner segment prioritizes a combination of other refinance research resources, including recommendations from friends, family and mortgage brokers or similar professionals.
Younger homeowner segments are very comfortable using online tools for their mortgage-related research. According to Statista, a 2019 study showed 48% of Millennials were online “almost constantly.” The study indicated Millennials spent an average of 31 minutes on a desktop for personal use and 211 minutes using the internet or apps via mobile per day. Similarly, as a generation, Gen Z represents “true digital natives” who have never known life without smartphones, internet or other personal technologies.
Using online tools may also make the process of identifying multiple loan options and interest rates more efficient. This is important because younger homeowners are more than twice as likely as older homeowners to research a higher volume of refinance options, according to survey data.
3. Gen Z & Millennial Homeowners Often Refinance To Cash Out Equity
Gen Z and Millennial homeowners are a top segment for cash-out refinance mortgages. In fact, 18.2% of these younger homeowner segments noted cashing out equity as a primary reason to refinance. 49% of Millennials have a Bachelor’s degree or higher, and 84% of eligible Gen Zers and 76% of Millennials had student loan debt in 2020. One of the most common reasons for cash-out refinances is the opportunity to use funds to pay off student debt, because refinance mortgages typically carry lower interest rates than many private student loans. In fact, refinancing mortgages to pay off student loans has become so popular in recent years that Fannie Mae launched its own program, Student Loan Cash-Out Refinance, specifically designed for homeowners with student loan debt.
The Mortgage Market Is Setting The Stage To Help Lenders Scale Refinance Volume Among Younger Homeowners In H2 2021
In addition to the favorable rate climate, news from the Federal Reserve could be indicating a strong position for the mortgage market for the second half of 2021. After the Fed’s April meeting, Jerome Powell, Federal Reserve Chairman, announced in a press conference that the central bank’s decision was to hold interest rates near zero. Powell signaled that there is not currently a plan to increase rates, as the country’s economic climate continues to improve slowly. If mortgage market conditions maintain their current status, it is likely that more Gen Z and Millennial homeowners, driven to secure favorable mortgage interest rates, will take steps toward refinance loans.
For mortgage marketers seeking to connect with younger homeowners, now is the time to make sure you understand what drives this audience to refinance, where they are doing their research and what they are looking for before they take action.
About The DMS 2021 Refinance Mortgage Consumer Trends
The DMS April 2021 Refinance Mortgage Consumer Trends online survey revealed major influencing factors that impact consumer decisions connected to early milestones in the refinance mortgage loan process. Data is based on an online survey of more than 250 homeowners ages 18 and older across the U.S. All survey respondents were homeowners that had refinanced at some point previously or were considering refinancing in the future.
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