For some, this could be forgiven – it is, after all, one of those terms that is often banded around with very little context behind it. However, it is essential for those of us working within the mortgage sector to have a good working knowledge of who comprises Generation Z, Gen-Z, iGen or centennials, to use their most common terms, and how they live their lives.

The fact is that Gen Z is set to make up the biggest cohort of consumers – and, by virtue, will form the biggest group of future homeowners. It will therefore be vital for mortgage providers to ensure they are interacting with them in a manner that resonates. To achieve this means starting to plan now – otherwise a golden opportunity for lenders could be snatched away before it has properly begun.

Therefore, let’s define exactly who Gen Z is, and how mortgage providers can communicate with them using their very specific language and preferred methods of commnication.

Who is Gen Z?

The term Gen Z refers to the generation that was born between 1997 and 2012, following the millennial generation.

By default, Gen Z already has a certain degree of consumer clout. Some of the oldest are now young adults in their early 20s, who are already firmly established within the workplace – and some will already be homeowners.

The key thing that sets Gen Z apart from other generations is that they eat, sleep, and breathe social media and the internet. They were raised on it. Indeed, those people who form Gen Z are the first generation of true digital natives.

Crucially, they have never known a time where they cannot partake in internet banking, speak to a chatbot, or organise their entire lives online, whether this might be ordering a new credit card or selecting a takeaway. Furthermore, Gen Z’s use of mobile devices continues to increase. Some 98% of them are thought to own a smartphone and they are estimated to average more than four hours a day on apps — a figure that doesn’t include gaming time.

Let us not forget that the expectations of Gen Z are high due to their experiences of interacting with a seamless online offering multiple times every day. Being able to start a journey on a mobile device is now expected and having instant support, access to vital information and the ability to obtain guidance through a chatbot or direct contact to an agent is the new norm.

This is the core of their behaviour that mortgage providers need to be aware of – and should already be factoring into their business development plans.

Laying the foundations – NOW

With the eldest members of Gen Z already embarking on their home buying journey, what might be a steady trickle now will soon become an explosion as more and more Gen Z members leave education and become fully paid-up members of the homeowners’ club.

It is therefore essential for mortgage providers to ensure they are perfectly placed to grab a slice of the Gen Z pie.

The providers who face the most danger from a lack of Gen-Z interest are those that still rely on legacy systems. These systems usually centre around teams of representatives speaking to customers by telephone, or in person in a high-street branch, for long periods of time to thrash out a mortgage offer. Furthermore, there sometimes needs to be more than one meeting to achieve this.

For a Gen Z native used to doing everything online, nothing could be more off putting than these methods. Therefore, if a lender is not already looking at new digital systems, they risk alienating this future key group of homeowners.

However, new digital platforms can easily sit alongside the more established, traditional methods that many homeowners prefer. If a provider still wants to offer a face-to-face method, this is, of course, fine. Indeed, many providers pride themselves on offering a personal touch, and enjoy giving homeowners a face-to-face experience. Building societies especially, valuable institutions which quite rightly sit at the heart of their communities, see this as an essential service, an offering that many of their users welcome.

It would, of course, be wrong for them to suddenly stop this personal approach, especially if it is a valued service. However, they can still look to invest in digital capabilities alongside their current offering. Indeed, for many providers, this approach would provide the perfect balance of servicing their current customer profile, while crucially opening a line of dialogue with Gen Z – their customers of the future.

Furthermore, by using the savings generated from new digital technologies and harnessing new operational strategies, community providers such as building societies can put the savings towards maintaining their physical branches, a valuable asset of many building societies and a key enabler of their face-to-face functionality.

The Tik Tok mortgage

Digitally-savvy Gen Z consumers are demanding accessible digital banking services from their providers. They are increasingly turning to neobanks (operating online-only) and fintech unicorns to conduct their banking, payments and investing.

The emergence of ‘FinTok’, a community on popular app TikTok for sharing financial advice, in recent years has proved the value of social media as a Gen Z financial services influencer. Indeed, since blowing up during lockdowns in 2020, TikTok has moved away from just being an app for sharing trending dance videos. It is now also established as a source of education for younger generations, doubling as a video app and search engine.

FinTok is now likely to be seen as a community of advice on personal finance, investment and crypto, or saving money in the cost-of-living crisis. We are increasingly seeing financial influencers promoting their services on Tik Tok, with some of the UK’s financial services household names already having a presence on the app.

Furthermore, there are many searches for mortgages and financial products taking place from Tik Tok users daily.

However, should lenders be slightly wary of social media platforms? After all, while the financial services sector is quite rightly the focus of forensic levels of regulation from official governmental bodies, can the same be said for social media? Such outlets often feature in the news pages for

negative reasons, such as allowing unchecked content to be published, and for allowing the spread of sometimes incendiary messages. However, if the lenders’ lawyers are confident, and content can be carefully managed, social media platforms are certainly one of the key tools that can be used to reach the valuable Gen-Z audience.

The Metaverse mortgage

Alongside the rise in cryptocurrencies, one of the direct products of digital financial services functionality, we are seeing a rise in ‘metaverse mortgages’ – which are very real, and just like traditional mortgages, need to be treated very carefully.

Metaverse land is intangible real estate you cannot touch. However, it has a substantial following – one which is growing. Just as bitcoin’s total supply is capped at 21 million, there are only 90,601 parcels of land in the digital metaverse of Decentraland – and the forecast is that demand will increase.

Whether traditional high street lenders will enter this market remains to be seen. However, some of the big financial services players have already placed their bets, with JPMorgan becoming the first global bank to invest in a popular metaverse platform by opening a lounge in Decentraland.

One thing is for sure – out of all the generations in the word now, it will be Gen Z that will be the most likely to take up a metaverse mortgage.

Conclusion

The essential take away from this analysis is simple.

Gen Z are likely to conduct their future home buying research using digital channels – and are also likely to commence their actual application using such methods.

Furthermore, mortgages themselves are also undergoing a substantial evolution.

It is therefore essential for mortgage providers to be prepared for this trend – which involves laying the foundations for change now. It is crucial to understand this does not necessarily involve taking a sledgehammer to methods that might be long-established and are valued by current customers, as the two can easily sit alongside each other.

However, Gen Z are the homeowners of the future – it is essential to be prepared

Jerry Young is chief executive of ieDigital