HELOC providers are falling short with their digital offerings, allowing alternative lenders to muscle in on their potential business.
A report from J.D. Power says that despite record-highs, HELOC originations have been steadily declining with competition, tax laws, and interest rates all playing their part in a perfect storm.
John Cabell, Global Business Intelligence Practice Leader at J.D. Power says that HELOC providers can’t just rely on their privileged position of having existing relationships with home loan customers.
“Customers are being wooed by increasingly sophisticated competitors. Right now, HELOC providers are struggling to deliver digital experiences that are in line with customer expectations. That is becoming a major drag on future business as new, digital-native competitors enter the marketplace,” said Cabell.
The firm’s 2019 U.S. Home Equity Line of Credit Satisfaction Study released Thursday, reveals that two-thirds of new HELOC customers who obtained their line of credit within the past two years considered alternative products when shopping for their HELOC, a figure that is up from 41% just a few years ago.
HELOC provider failings
Despite rising use and satisfaction with digital channels in virtually every other aspect of retail banking, satisfaction is lowest among HELOC customers who gather information entirely online (819 on a 1,000-point scale) vs. those who gather information in person or via phone only (836) and those who used both online and in-person channels (864).
Existing HELOC customers who have had their line of credit for more than two years are notably less satisfied with their lender than are new customers. Longer-term customers also have lower levels of product understanding and awareness of offerings. Satisfaction increases the more engaged the HELOC customer is with their lender.
The study also found that customers shopping for HELOC alternatives are most concerned about variable interest rates, overextending debt, and higher payment after draw period.
“There are some very obvious areas where HELOC providers could make tremendous improvement by taking certain steps,” Cabell said. “One of the easiest is alleviating customer concerns during the shopping process by publishing clear information on their website about interest rates and payment schedules.”
Who’s getting it right?
Regions Bank ranks highest in overall customer satisfaction with a score of 869, followed by Huntington National Bank (860) and BB&T (846).