Borrow-Happy New Mortgagors

As per a recent survey by the TransUnion Financial Services on US mortgage applicants having a prime or better credit-rating, people seeking mortgage are up to three times more likely to apply for extra in the subsequent period of 12 months.

Please note: Though the report is based on findings for US-based mortgage applicants, it’s fairly evident that things aren’t be too different in Canada.

Ezra Becker, who co-authored the study, said that the finding is significant since “it quantitatively confirms the conventional wisdom.” Becker is TransUnion’s Senior VP, Research and Consulting.

The finding also indicates that people who apply for mortgage were:

• 50% more likely to apply for a Credit Card within the next 12 months of their mortgage query.
• Thrice more likely than overall consumers to ask for a car loan.

This tendency to borrow (more and more) is somewhat the reason behind lenders coveting mortgage borrowers. Customer like these are fairly mature for cross-selling and, when we talk about the broker zone, nobody does it better than the Scotiabank. With some share of luck, various deposit-taking lenders, including TD, are seizing the moment to provide financial service promo to new clients referred by the brokers.

And for a thought, brokers who unremittingly complain regarding branch signings, what if the banks started considering our channels as unprofitable (since there’re no adequate cross-selling opportunities) and pulled out completely.

The study by TransUnion’s also found something fairly curious. Credit card spending tends to rise essentially right before the mortgages are to be paid off. And, in the month ahead of discharge, customers were found increasing credit card spending by up to 3 times the threshold they spent some six months back.

In this regard, TransUnion’s VP Charlie Wise said: “A long held assumption among lenders is that new mortgage applicants spend less on their credit cards prior to their mortgage closing event – either to ensure their credit picture does not change or simply because they anticipate spending more once they move into their new home.”

He further revealed that millions of customers tend to raise their card spending a month ahead of their mortgage origination. Whether it is to update their existing property or to purchase furnishings, many customers (who move) raise their card spending prior to relocating to their new residence.