What to know about loan marketing in a rising rate environment

There’s never a dull moment in the world of loan marketing, but even by industry standards, 2022 has been a busy year. The Fed has already announced four major interest rate increases, and hinted that more could be on the way in Q3 and Q4. Jane Johnson, principal client strategist with Deluxe Data-Driven Marketing, shares what lenders need to know to stay on top of a fast-changing market:

As principal client strategist, you have real-time experience with what’s happening out in the field. What do your clients say are their biggest challenges right now?

The rising rate environment has required all my clients to shift their focus in a short period. For a long time, leads were coming to them directly. The focus was just on talking rate and term. Now they're having to turn their lead generation engines back on and proactively look for consumers who are in the market. The rates shooting up to over 5% definitely changed the playing field.

How have the rate hikes changed the conversations you have with your clients?

One thing I make sure we talk about is retaining their existing customers. I think that there was a bit more focus on acquisition in the past because everybody was in the market, and lenders knew that there was that flurry of refinance opportunity. Now it's really making sure you hang on to your own customers, service them well, and getting in front of them as soon as you know that they're in the market for another product.

What do you think is a misconception people have about loan demand in a rising-rate environment? What’s something you wish more marketers understood?

I had some clients who were ready to move away from mortgage entirely with regard to their marketing budget. And there's still a big opportunity out there in home lending if you’re focusing on the right products.

For example, cash out refinance or HELOC can still be a good product for customers that have equity in their home. People have seen huge increases in the equity in their homes this past year, so that is a great way for someone to access cash at a low rate if they have a need. Even at 5%, that's still lower than a lot of personal loans or credit cards.

And why is it so important to monitor for signals that a customer is in the market?

It’s so important to understand when one of your own customers is raising their hand and signaling that they’re in the market, so that you don’t end up losing that customer to another lender in this tight market.

People are unpredictable. You never know when all of a sudden one of your customers is going to want to purchase a new home, or have a financial need come out of left field. These are things that you just can't always predict, and when it’s your own customer, you want to help them solve for that need before another lender does.

Even if one of your customers has an existing mortgage today, but it's with another lender, we’ll get data on that current loan, so that you know how to market to them for the next one.

What are the biggest changes to marketing strategy that we should expect as a result of the Fed’s rate hikes?

I think there's going to be a change in how home loans are marketed, similar to how cars are being sold today. People don't really walk in and say, “I want a 3.99% rate.” They say, “I want to pay $600 a month for my car.” It’s really just, what is that monthly payment they want to or can afford to make?

Rate was definitely front and center on the offer, and now you’ll see it getting put on the back side of letters in the disclaimers.

In your experience, how has the current lending environment affected the actual loan products banks are promoting?

Purchase, cash out refinance and home equity are in the highest demand right now. And not all lenders offer them, but for those who do, non-qualified mortgage (NQM) loans are another great product to be promoting. We’re seeing higher demand for these because of two dynamics we’ve all heard a lot about: the number of property investors and renters going up, and just the sheer number of people who are starting businesses and are now self-employed.

At Deluxe, we've got the ability to identify customers who are either self-employed or property investors, who aren't able to qualify through a traditional income verification method, so we'd know who a good target for those products would be.

Finally, what kinds of channels produce the best results in a shifting market?

For retention, cross-sell and new customer acquisition in financial services, old-fashioned direct mail is still the most cost-effective channel. Adding email or digital to a direct mail can provide lift, but we've really not seen email- or digital-only acquisition campaigns do very well yet, just because it's for a financial product. People just aren't used to clicking on a digital ad for a lender or bank they don’t know.

And people’s inboxes are getting overwhelmed even more so than their mailboxes. So direct mail is a great tool for a customer campaign to get through the clutter. Even if a customer normally likes to come in online, getting that reinforcement of a physical piece of mail might be the thing that's needed to have them respond.

There’s a lot of consideration that goes into a financial product decision. It isn’t a split-second, “I saw a digital ad so I’m going to click on it and buy it.” Having that piece of paper or that postcard sitting on your desk, so you have time to think about, is important.