Since 2016, consumer demand for mortgages has more than doubled, primarily driven by the low-interest rate environment and rising home purchase intentions. In 2016 and 2018, the Raddon Research Insights study, If You Build It, They Will Come, found the number of households planning to purchase a home in the next two years to be 8 percent and 11 percent, respectively. That figure soared to 25 percent in 2020.

This uptick in home purchase intentions can mostly be credited to millennials, 68 percent of whom anticipate buying a home in the next five years, and almost half of whom plan to purchase a home in the next two years. While many of these millennials are first-time homebuyers, 55 percent are looking to upgrade from their currently owned starter homes.

Twenty-seven percent of borrowers said they look to their primary financial institution first when they are in the market for a mortgage. The same percentage said they would look to a major bank, followed by credit unions at 23 percent.

Financial Institutions Are Seeing Double-Digit Growth in Real Estate Balances

According to the Raddon Performance Analytics program, the average financial institution loan balances have increased only 2.9 percent in the past year. Institutions have seen decreases in HELOCs and credit card portfolios as consumers pay down revolving debt. But one area that saw a large increase was mortgages, with an annual balance growth of 16.8 percent since the start of the pandemic. A lot of this increase has been driven by millennials, whose product usage has increased 15 percent since 2019 and their balances have increased over 16 percent. Let’s focus on those institutions finding the most success in mortgage and equity growth.

Common Themes From Successful Financial Institutions

1. First-time homebuyer programs. Whether it’s the option for $0 down, educational programs or even a first-time homebuyer certificate, institutions are capitalizing on the strong demand from millennials for homes that is driving the market.  
   

• Fast and EASY. Institutions are doing their best to make it known that opening a real estate loan at their institution is simple and fast – sometimes even branding that message into the name of the loan. And if you can apply online, the messaging is prominent. If you don’t have the ability for consumers to apply for these types of loans online, make it as personal as possible by showing the faces and direct numbers of the mortgage contacts at the institution.
• For equities, it’s all about the introductory rates and, more importantly, getting that initial draw. As we’ve seen, a lot of institutions struggle to get accountholders to use their lines as they are saving it for an emergency or future use. Institutions can take their equity products to the next level by adding flexibility to the product to lock in portions of the loan for longer periods of time.

Success With Mortgages

Diamond Credit Union in Pennsylvania saw 50 percent growth in mortgages as of the end of 2020. Among the many benefits of its mortgage product, it emphasizes how easy it is for their members.

WyHy Federal Credit Union in Wyoming saw over 50 percent growth in its mortgage portfolio. The credit union offers members a Streamline Mortgage with an emphasis on improving members’ financial health. It offers $499 closing costs and an opportunity to own your home in 10 years or less, and it includes a YouTube video to help members understand the product.

Onpath Federal Credit Union in Louisiana puts an emphasis on its unique mortgage products. One that stood out is the Professionals Mortgage. This product is created for new doctors, lawyers, dentists, engineers or any professional who is near completion of their training or in the first year of their new career. Onpath saw over 70 percent growth in its overall mortgage portfolio.

Dupaco Credit Union in Iowa also saw 70 percent growth in its mortgage portfolio. One way it is helping first-time homebuyers is with a $1,000 grant to help cover closing costs.

Success With HELOCs

Although most institutions saw their overall HELOC portfolio decrease since the start of the pandemic, some institutions are still finding success.

Low introductory rates for HELOCS have always been popular, but Kitsap Credit Union in Washington is finding success by attaching some strings to that offer. Members can only get the very low introductory rate of 1.99 percent for 12 months by advancing $10,000 or more.

Bellco Credit Union in Colorado has seen over 65 percent annual growth in its equity product. Choiceline is differentiated as a home equity line with the flexibility to lock in up to three fixed-rate advances.

Hanscom Federal Credit Union in Massachusetts has an innovative product that offers members flexibility. The 3-in-1 Advantage Plan gives members a hybrid equity line and loan product along with a credit card. The credit card makes accessing funds extremely easy.

Global Credit Union in Washington took a simple approach to incent its members to draw on their lines of credit. If members draw $500 or more, they will receive $100.

Questions to Answer and Next Steps

• Understand and educate yourself about the demographics of your accountholder base. Questions to answer include: What percentage of your accountholder base are millennials? Do these millennials have mortgages? Are they renters or homeowners?
• Considering the surging demand for mortgages from millennials, make sure your products and services are relevant to this group. Do you have a first-time homebuyer program? Are you tailoring your equity products to a younger base that you know is moving on from their starter homes?
• Are there steps you can take to make the process of opening a real estate loan easier for accountholders? Online and mobile account opening makes this process the easiest. While millennials do prefer digital channels overall, they still want that personal face-to-face interaction when making big decisions. Make sure your real estate area is as personable as possible.
• Examine the utilization of your HELOC product. Many institutions are having success with acquisition campaigns but are struggling to get their accountholders to draw on the line. If your portfolio has low utilization ratios, consider adding a promotional rate or adding some incentives that encourage accountholders to take that draw.

Next month, we’ll focus on the auto arena. And check out last month’s article, What Top-Performing Financial Institutions in Credit Card Growth and Penetration Have in Common.