2/3 of US adults believe Mortgage Advertising & Marketing lacks credibility.

Given all the negativity surrounding the sub-prime mortgage marketplace, it is no surprise that consumers have questioned the credibility of the current marketing and advertising for mortgage products. Just one-third of US adults (34%) view the advertising and marketing of mortgage products as credible, with the majority (66%) viewing it as not credible. In fact, one in five adults (22%) report that they view the advertising and marketing of these products as ‘not at all credible.’

These are some of the results of a Harris Poll of 2,383 U.S. adults conducted online between May 8 and 14, 2007 by Harris Interactive.

These numbers have significant implications for the type of trust the American public has in financial institutions. When probed further about their perceptions of the financial institutions that provide mortgages, only one-quarter (27%) of U.S. adults report favorable perceptions, with just three percent saying their perceptions are very favorable. “Given the large proportion of consumers who are riding the fence, now more than ever would be a good time for these institutions to examine their mortgage product advertising and marketing messages,” says Sanford Brumley, Vice President of Client Development for the Harris Interactive Financial Services Group.

The study highlights that advertising favorability does not always equate to favorability towards the institution offering the mortgage products. For example, African Americans are more inclined than Whites or Hispanics to view marketing/advertising for mortgages as credible (44% vs. 33% and 34% respectively). At the same time, however, they exhibit the most negative sentiment toward institutions providing these mortgage products, as one-third (37%) of African Americans have an unfavorable opinion compared to one-quarter (26%) of Whites and one-third (30 %) of Hispanics.

According to Natalie Jobity, Vice President of Research for the Harris Interactive Financial Services Group, “The data further emphasize why a ‘one size fits all’ approach is not effective in terms of the messaging used to inform and educate consumers about mortgage offerings. This is especially true when communicating to different ethnic groups.”

Perceptions about Mortgage Products

The overall sentiment towards various mortgage options is generally unfavorable, with one major exception: fixed rate mortgages have the highest level of favorability with 71 percent of those who are aware of the product reporting that they feel favorable about them. Over half (52%) feel favorably towards home equity loans, but even so, just 15 percent of them say they feel very favorable towards it.

Among the other options, one quarter of adults have a favorable impression about no/low down payment (27%) as well as reverse mortgages (25%). Over half feel unfavorably towards Adjustable Rate Mortgages (ARMs; 53%), while at least three in five feel unfavorably towards interest only mortgages (60%) and balloon mortgages (68%).

Consumer Awareness and Knowledge

Consumer awareness of mortgage products is high with over seven in ten being aware of Home Equity loans (78%), ARMs (74%), fixed rate mortgages (72%) and no/low down payment options (71%). Even among the newer mortgage products available awareness is high with six in ten consumers reporting familiarity with balloon (64%), reverse (64%) and interest only (63%) mortgage options. Additionally, older adults are significantly more aware of the various mortgage products than their younger cohorts.

Consumer knowledge of fixed rate mortgages and home equity loans is the highest among the different mortgage options. Among those who are aware of the products, two-thirds (68%) are knowledgeable about fixed rate mortgages and 65 percent are knowledgeable about home equity loans. Over half of consumers report being knowledgeable about ARMs (58%), Balloon (52%) and Interest only (52%) offerings. Just half say they are knowledgeable about no/low down payment and reverse mortgages (49% for each). Other interesting highlights include:

– When it comes to balloon and no/low down options, African Americans and Hispanics report being more knowledgeable about no/low down payment and balloon options than Whites. Two-thirds of African Americans (65% for each) say they are knowledgeable about both, while two-thirds of Hispanics are knowledgeable about balloon mortgages and 60 percent are knowledgeable about no/low down options. Just half of Whites (49%) are knowledgeable about balloon mortgages while 45 percent are knowledgeable about no/low down mortgages;

– Hispanics are most knowledgeable about interest only mortgages with two-thirds (65%) saying they are knowledgeable compared to 55 percent of African Americans and half of Whites;

– Older generations and men are typically more knowledgeable than younger generations and women about the various mortgage options.

Usage of Products

Given consumers’ high awareness and knowledge about mortgage options, however, ownership of these mortgage products is low. Over half of consumers (54%) do not own any mortgage product, just one-third (33%) own a traditional fixed rate mortgage and 16 percent have a home equity loan. Ownership drops significantly for all the other types of mortgage offerings with less than one in ten consumers owning offerings like ARMs (7%), interest only (5%), no/low down payment (4%), balloon (2%), and reverse (2%). Looking at generation, two in five Gen Xers (42%) and Baby Boomers (43%) have a fixed rate mortgage compared to 15 percent of Echo Boomers and 27 percent of Matures. Four out of five Echo Boomers (79%) have none of these products.

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