Since the start of 2023, nearly 40% of mortgages have locked in to rates of 6% or more. Now, with the prospect of lower rates on the horizon, the mortgage industry is increasingly shifting to refinancing – for the first time in several years. Even with only modest rate drops recently, the volume of refinances is picking up, from 13% of total fundings in Q2 to almost 15% so far in Q3. For mortgage servicers, the trend should be a significant opportunity.
But retention and recapture rates have been falling since 2022 as borrowers focus on finding the best possible rate rather than a more streamlined process (see chart). So, servicers have had to take it up a notch: They’re increasing messaging directly to their borrowers through their servicing portals. A review of experience data through Curinos’ Digital Banking Analyzer found that messages often include features such as an “estimated equity” metric to encourage home-equity solutions or prompts to “get started now” on a refinance. Both types of prompts, along with almost everything in between, are becoming increasingly common as servicers look to retain the value of the relationship while improving overall user experience.
The evolution of mortgage servicing and how servicers are shaping borrower engagement and their journeys are but two of the underlying changes to the housing market, perhaps unanticipated, that this impending falling-rate cycle has set in motion.
Recapture Rates
Recapture rates are declining, so many mortgage services
are making their case directly to the borrower.
