It’s cheaper to keep a mortgage customer than get a new one

I spend a lot of time talking about going out and getting new business. Working with Realtors, courting first time home buyers, partnering with local housing non-profits, but I have not ever talked much about trying to retain the existing borrowers you already have.

There’s a wide range of industry research that it’s five to seven times cheaper to keep an existing customer than go out and get a new customer. And if’s that truly the case perhaps Credit Unions should be thinking about how to hold on to the borrower’s they already have. MGIC, through their Lender Landscape product, has been studying this retention for a long time.What does their data say and what should it mean to Credit Unions? Read on….

MGIC’s data, which is made up of origination and servicing data from a few Credit Unions and some of the largest bank and non-bank mortgage lenders show that all lenders retain only 18.1% of their customers who pay off the existing loan and get a new loan. The best in class is at 24.3% – not much difference. This means that only about 1 in 6 borrowers come back to their lender for a new loan whether it’s to refinance or purchase a new home.

The Lender Landscape data also looks at the data by channel. If you just analyze the retail lending side, which is where most Credit Unions play, the industry average is still only 19.6% – not much of a difference.

So about 4 of 5 borrowers is choosing another lender when they get their next loan. Why?

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