Gen Z: The Next Generation of Mortgages
Gen Z is the next generation to enter the housing market. 97% of Gen Z plans to purchase homes in the future. Millennials have the lowest rate of home ownership than any other generation at 48.6%, yet are currently the largest group in the housing market. So far, Gen Z owns about 2% of the housing market, but that number is sure to grow in the coming years.
As more of Gen Z grows older and graduates college, they will continue to enter the housing market. They are the first generation to grow up their entire lives in the age of technology. This means they are more fluent in online programming and using resources online. This leads to searching for and potentially buying homes electronically.
Fintech and Digital Mortgages
Fintech is a shortened way of saying “financial technology”. Fintech companies bring financial services that you would typically find in a physical financial institution, online. As the world continues to become more digitized, the need for fintech companies to continue innovating will rise exponentially.
As more of Gen Z continues to enter the housing market, the need for fintech companies to provide digital mortgages will increase. Gen Z has already applied for student loans online, so they already have experience with the online borrowing process.
How does a Digital Mortgage work?
A digital mortgage is a mortgage that is applied for, processed and completed online. Brokers buy programs from third-party technology providers to allow them to offer digital mortgages. These programs automate the loan application process. This is beneficial to brokers and borrowers as well.
The automated process is called straight-through processing. It allows for the entire process of acquiring a loan to be automated. This benefits brokers by decreasing labor costs. It also benefits the borrower by reducing the amount of time it takes to process the loan, which in turn allows for homes to have a quicker turnover rate.
Gen Z and Digital Mortgages
With Gen Z growing up in the age of technology, they expect quick results with everything they do. They have grown up with all of the information they could ever need in the palm of their hands. Apps like TikTok have popularized short, to-the-point videos that give users the information or entertainment they need in the shortest amount of time possible. All of this fast-paced technology has shortened the attention span of Gen Z. Studies have shown that the attention span of Gen Z has decreased to 8 seconds, which is 4 seconds shorter than millennials, who have also partly grown up with technology. With their shorter attention spans, gen z will expect to quickly apply for a loan online and receive results within days or even hours.
Straight-through processing has allowed for the manual labor of processing a loan application to disappear. With this, time will be saved because the programs are designed to quickly examine data that is inputted and deliver results right away. The possibility of human error is also avoided.
Gen Z will also understand how the full process works better through the use of technology. Because they have become so accustomed to doing almost all of their daily tasks through the use of technology, applying for a mortgage digitally will fit right in with everything else they get done online.
How will Mortgages Evolve Further with Gen Z?
A majority of Gen Z is not confident in their financial literacy. Digital mortgage applications are a way for their generation to be successful in their financial decisions that is easy for them to understand. If a broker offers a digital process, it will for sure attract their attention. With continued interest in online mortgages will come innovation.
The use of big data technology is one way the mortgage industry will evolve in the future. Big data is currently beginning to be used in other industries, such as medicine, but the mortgage industry has not yet adopted this practice. One reason is because borrowers may not trust inputting all of their data online. Instead, they would rather submit paper documents to their broker.
The use of big data technology would speed up the process exponentially. Big data tech has the ability to sort through extremely large amounts of data that traditional data processing is not capable of. Sorting through the data at such a fast pace would allow the mortgage to be even quicker than it already is through the use of straight-through processing.