Consumer trust and sentiment towards various home-loan options is waning amidst the collapse of some major subprime mortgage lenders and an overall housing downturn.
A new poll of consumers shows that many have questioned the credibility of current marketing and advertising messages for mortgage products, which isn’t much of a surprise given the negativity surrounding the subprime market.
Sixty-six percent of respondents in a Harris Interactive poll released today said they view the advertising and marketing of mortgage products as not credible, while 34 percent took the opposite view. Twenty-two percent reported that they view the advertising and marketing of these products as “not at all credible.”
When probed further about their perceptions of the financial institutions that provide mortgages, only one-quarter (27 percent) of participants reported favorable perceptions, with just three percent saying their perceptions are very favorable.
Sanford Brumley, vice president of client development for the Harris Interactive Financial Services Group, in a statement said, “Given the large proportion of consumers who are riding the fence, now more than ever would be a good time for these institutions to examine their mortgage product advertising and marketing messages.”
The study highlights that advertising favorability does not always equate to favorability towards the institution offering the mortgage products. For example, African Americans are more inclined than whites or Hispanics to view marketing/advertising for mortgages as credible (44 percent versus 33 percent and 34 percent, respectively). At the same time, however, they exhibit the most negative sentiment toward institutions providing these mortgage products, as one-third (37 percent) of African Americans have an unfavorable opinion compared with one-quarter (26 percent) of whites and one-third (30 percent) of Hispanics.
According to Natalie Jobity, vice president of research for the Harris Interactive Financial Services Group, “The data further emphasize why a ‘one-size-fits-all’ approach is not effective in terms of the messaging used to inform and educate consumers about mortgage offerings. This is especially true when communicating to different ethnic groups.”
The overall sentiment towards various mortgage options is generally unfavorable, according to the poll, with one major exception: fixed-rate mortgages have the highest level of favorability with 71 percent of those who are aware of the product reporting that they feel favorable about them. Over half (52 percent) feel favorably towards home equity loans, but even so, just 15 percent of them say they feel very favorable towards it.
Among the other options, one quarter of respondents had a favorable impression about no/low down payment (27 percent) as well as reverse mortgages (25 percent). Over half feel unfavorably towards adjustable-rate mortgages (53 percent), while at least three in five feel unfavorably towards interest-only mortgages (60 percent) and balloon mortgages (68 percent).
Consumer awareness of mortgage products is high with more than seven in 10 being aware of home equity loans (78 percent), ARMs (74 percent), fixed-rate mortgages (72 percent) and no/low-down-payment options (71 percent). Even among the newer mortgage products available, awareness is high with six in 10 consumers reporting familiarity with balloon (64 percent), reverse (64 percent) and interest-only (63 percent) mortgage options. Additionally, older adults are significantly more aware of the various mortgage products than their younger cohorts, according to the poll.
Consumer knowledge of fixed-rate mortgages and home equity loans is the highest among the different mortgage options. Among those who said they are aware of the products, two-thirds (68 percent) are knowledgeable about fixed-rate mortgages and 65 percent are knowledgeable about home equity loans. Over half of consumers report being knowledgeable about ARMs (58 percent), balloon (52 percent) and interest-only (52 percent) offerings. Just half said they are knowledgeable about no/low-down-payment and reverse mortgages (49 percent for each).
Given consumers’ high awareness and knowledge about mortgage options, however, ownership of these mortgage products is low. Over half of respondents (54 percent) said they do not own any mortgage product; just one-third (33 percent) own a traditional fixed-rate mortgage; and 16 percent have a home equity loan.
Ownership drops significantly for all the other types of mortgage offerings with less than one in 10 consumers owning offerings like ARMs (7 percent), interest-only (5 percent), no/low down payment (4 percent), balloon (2 percent), and reverse (2 percent).
Looking at generation, two in five Gen Xers (42 percent) and baby boomers (43 percent) have a fixed-rate mortgage compared with 15 percent of echo boomers and 27 percent of matures. Four out of five echo boomers (79 percent) have none of these products.
The Harris Poll surveyed 2,383 U.S. adults online May 8-14, 2007.