By Matthew Warzala
A mortgage relationship is the key differentiator between members who are unprofitable and those who are profitable, according to a case study produced through a partnership between Marquis and CU Companies. In fact, members who utilize mortgage products are considerably more profitable.
For a household with a mortgage, the average household deposit balance is $67,555 – that compares with just $16,075 for a household without a mortgage, according to analysis by CU Companies. Households with mortgages also have a higher cross-sell ratio of 2.75 compared; the ratio is 1.98 for households without mortgages. Generally, households with a mortgage also are more profitable averaging $938 more than households without mortgages.
More cross selling, in turn, increases member loyalty. The more products members have with a credit union, the longer they stick around. A consumer with one product stayed for just 1.5 years whereas a consumer who utilizes three products stayed six to eight years with their credit union, according to CU Companies research.
Above and beyond the benefits to your total relationship with your members, mortgages themselves also are significantly more profitable than auto loans, for example. Marquis and CU Companies studied a credit union with $350 million in assets that conducted an auto loan campaign. The campaign resulted in 115 new auto loans. Yet, the annual profitability for each household that owned a share and purchased an auto loan was negative $96. Borrowers in the same credit union that had a mortgage, in addition to a share and an auto loan, had household profitability of $1,402. (The difference comes from mortgage referral fees paid by CU Companies to the credit union, or from gains on the sale of mortgages.)
Since offering mortgages puts you on a faster track to increasing the profitability of your relationships with members, you should invest in marketing mortgages to existing members. We have found that the optimal audiences for loan-officer calling programs are:
– New account holders, older than 25, that started with other products in the previous month, such as opening an auto loan or a checking account.
– Borrowers whose current mortgage loan is approaching four years.
– Borrowers with current Home Equity Line of Credit (HELOC) loans that don’t have first mortgages.
– Borrowers ages 25 to 45 who have a checking account and at least two other loan products with total balances of $5,000 (above and beyond any HELOC balances).
From the standpoint of creating marketing materials, CU Companies has made it very easy to get advertising up at the branch or sent out to members. Our online Marketing Library is a value-added solution for all of our partners to use. With over 25 ready-to-use campaigns to choose from, we help make it easy for you to communicate with your members. And, we add a new featured campaign each month with a timely message that will get your members thinking at the right time.