In the aftermath of the real estate crisis many borrowers expressed intense dissatisfaction toward their mortgage lenders. Right or wrong, borrowers often accused lenders of putting them in bad mortgages that they did not really understand and could not really afford. Although we do not have official statistics that measure borrower sentiment in 2008, it is safe to assume that hundreds of thousands of borrowers, if not more, claim they got a “raw deal” on their mortgages.
Fast forward almost ten years and how do current borrowers feel about their mortgages? According to the FREEandCLEAR Mortgage Survey, the vast majority of borrowers feel pretty good. When asked “Do you feel like you got a good deal on your mortgage?” 90% of survey respondents selected yes as compared to only 10% who chose no. In short, almost all borrowers feel like they got a good deal on their mortgage.
The results of this survey question certainly reflect well on mortgage lenders and show how much progress the lending industry has made over the past several years. It is quite a remarkable turnaround given the state of the industry and borrower sentiment in the not so distant past. So what is driving this newfound and very much welcome borrower positivity?
There are likely multiple factors that explain the FREEandCLEAR Mortgage Survey results. First, whether they were coerced by regulators or on their own volition, lenders eliminated many of the exotic mortgage programs that contributed to much of the borrower dissatisfaction, frustration and anger. Mortgages with negative amortization and pay-option ARMs have all but disappeared from the lending marketplace. While it has definitely become more challenging to qualify for a mortgage, more borrowers are likely getting loans that they understand and can afford which leads to improved borrower sentiment toward lenders.
There are also macro factors that contribute to the positive vibes from borrowers. The economy has stabilized, property values have improved and the mortgage default rate continues to hover near record lows. More people staying in their homes certainly has a positive impact on how they feel about their mortgages. Mortgage rates also remain near multi-decade lows which makes owning a home and paying the mortgage more affordable. It is not a stretch to suggest that the lower your interest rate, the more likely you are to feel like you got a good deal on your mortgage and our survey results support this hypothesis.
While the FREEandCLEAR Mortgage Survey is overwhelmingly positive, it also shows that 10% of borrowers do not feel like they got a good deal on their mortgage. While 100% customer satisfaction is impossible in any industry, the survey findings show that mortgage industry has room for improvement. When you extrapolate the results across millions of borrowers it means that a lot of people do not feel positive about their mortgage. The survey also makes us wonder how borrowers sentiment may shift if mortgage rates rise or if the real estate market falters. For now, however, much-maligned lenders should be satisfied to know they are providing borrowers with a good deal on their mortgage.
We will continue to provide a detailed analysis of each survey question on our blog in the coming weeks and you can review the full results from the FREEandCLEAR Mortgage Survey to better understand how borrowers think about and experience the mortgage process.