Using data analytics to drive lending opportunities

Times are changing for lending organizations. With rates on the rise, the lending environment is rapidly changing, and bankers need new strategies for a shifting landscape.  What should financial organizations be doing differently in 2022?

Current market trends

1. 30-year mortgage rates are up. Since the beginning of 2022, weekly average interest rates for the 30-year mortgage have increased from just above 3% to around 6%. 
2. Housing shortage is driving up loan prices. Housing supply has not kept pace with population growth. Labor shortages and supply chain issues have limited new construction, and low interest rates combined with an inventory shortage have led to an increase in housing prices, which are up 42% in the last 24 months.
3. Home equity at record high. Home values have risen nearly 20% from the previous year, and as of Q1 2022, tappable home equity in the U.S. is at a record high of $11 trillion—an average of about $207,000 per individual home owner.
4. Purchase is dominant home loan type. This trend is likely to continue for remainder of 2022, based on current interest rates. According to Deluxe's in-house data, Rate and Term loan quantity continues to drop, especially as rates rose above 4% in Q2 2022. At the same time, Cashout and Equity (Junior add-ons) grew over previous quarters, indicating that people are taking advantage of higher equity in their homes.

Focus on different products

Refinancing was strong when interest rates were low. But now that the rates are creeping up, and home prices have skyrocketed, homeowners have their equity back. They’re not looking for a refi. They’re looking to use that equity for home improvements or debt consolidation.

Take your spotlight off refinancing and shine it on purchase mortgages,  second mortgages, home equity lines of credit, auto loans and personal loans. That’s where the greatest opportunities lie.

How do we find the customers who can benefit most from these financial products? The answer to that is in the data and how you use it.

Use data analytics

Big data has reshaped virtually every aspect of the banking industry, loan opportunities included. Data analytics helps you to locate and target the right people for offers for financial products by picking up on signals based on their behavior, life events, and even passive data alone. 

1. Behavior-based signals. These are concrete actions consumers take that indicate they’re ready to purchase a new financial product. Online searches are one of the most powerful signals. Searching for a Realtor? Chances are you’re in the market for a mortgage. Hard credit inquiries? A credit hit means a consumer is considering a purchase, like a new car or a home. Pick up on that signal and boom, you’ve identified a potential customer for a mortgage or a car loan.
2. Life event signals. A child heading off to college, the birth of a baby, an adjustable mortgage rate resetting or an auto lease expiring are event-based signals that the consumer is about to experience a financial shift that will produce new financial needs like a college loan or a car loan.
3. Passive data. A consumer’s data alone builds a profile of predictive signals. This passive data could include a large amount of money sitting in a savings account or debt that could be consolidated. These triggers indicate they might be a good candidate for a consolidation loan or the purchase of a CD.

Banks can use this data to identify consumers with a low rate who might be in the market for a second mortgage or personal loan, identify renters who might be in the market to buy a house, or target homeowners who are paying off their mortgages. 

Oftentimes, you can use a combination of all three of these types of signals to get at an opportunity. Here’s how it works in practice:

And how do you capture this data? Deluxe Credit Trigger Solutions can help by tracking consumer signals for you. Pick a product you’d like to focus on—mortgages, say. Do a trial using inquiries from credit bureaus and other predictive data to identify mortgage shoppers who match your qualifying criteria. Just pay per consumer record, with no commitment or contract. See the kinds of results you get. You can use credit triggers as a standalone service or in conjunction with other marketing programs we offer.

Turning data into lending opportunities

Once you've obtained data on consumers' behaviors, life events or even passive info, target them using an omnichannel approach (a combination of ads, targeted direct mail, social media, targeted online advertising, email offers, and more). 

The key to remember here is relevancy. It all boils down to personalization. Stay away from blanket offers that cover a wide swath. What you want is a targeted message to reach the right customer, one customer at a time.

Data analytics gives in-depth insights into customer behavior, so banks can target customers and potential customers with marketing campaigns that are relevant and timely—think personalized product offerings, just when your consumers need them. By offering ways to meet their needs before they’ve even voiced those needs, you’re creating a powerful relationship with your customer, who feels understood. In this changing lending landscape, Deluxe has you covered.

This content is accurate at the time of publication and may not be updated.