The COVID-19 pandemic has presented a unique situation for global markets. The upside to this story is that the mortgage industry was able to adapt quickly and effectively to prevent a complete meltdown of the market. Despite shelter-in-place ordinances and restrictions in lieu of health and safety, the mortgage industry was able to navigate economic challenges, with some support of the federal and state governments. A key impact of the COVID-19 crisis is, obviously, seen on mortgage rates. The pandemic also causedan increase in Mortgage Forbearance due to mounting economic challenges for homeowners. You can read more about this in our previous blog.
Mortgage Industry Rates in the time of COVID-19
The effect of COVID-19 on Mortgage Rates was felt as early as the spring of 2020. This is the time when “The Fed” pumped billions of dollars’ in buying mortgage-backed securities. Though this act led to a sharp contraction in the economy, the injection of money into the mortgage financing system also resulted in a drop in mortgage rates. This gave buying power back to borrowers, who were struggling under the financial crunch. Mortgage rates have continued to drop and hit a historical low of below 3%, in September 2020. Traditionally, these rates hover around 4% for all types of mortgages. Though there was a drop in buying around March, the mortgage rate cuts boosted sales, and signs of recovery were seen in summer.
What’s in it for the buyers
As mortgage rates remain at all-time-lows, it seems like good news for new buyers as borrowing becomes cheaper. The effects of rock-bottom rates were seen in a rise in home-loan demand, which also helped in easing the blow of the pandemic to the economy to some extent. In addition, existing borrowers also have reason to rejoice as they can benefit from cash-out refinancing and negotiate lower rates for their mortgages.To know more about Cash-out refinancing, read our previous blog here.
Figure 1 - Mortgage Rates vs Applications Image source - http://www.mortgagenewsdaily.com/mortgage_rates/
However, the ambiguous economy and ever-changing market conditions are a cause for confusion among borrowers. Furthermore, home prices are rising as the supply of affordable houses remains low. This threatens to negate the benefits of cheaper mortgages. On average, median listing prices are 10.6% higher than last year.
How do Mortgage Loan Officers and Lenders cope?
It is encouraging that low rates have boosted demand for homes and, in-turn, mortgages. But supply remains tight with sellers reluctant to sell, looking at the overall economic fallout. Dealing with a fluctuating market is a challenging task. Add to this the increasing borrower concerns, both new and existingapplicants, and you have quite a task on your hands. As a lender, it is important to address customer concerns regarding online systems, refinance, credit scores, short term loans, etc. This can only be handled effectively if you have the correct information in your hands and that too in real-time across markets. inflooens Mortgage CRM software makes this possible by transforming the mortgage process. With figures and data promptly communicated to you and your teams, you can provide the necessary guidance to your customers promptly and transparently. Here it is important to note that only the companies and service providers who adapt and evolve will be able to thrive even after the market returns to normalcy.
What does the future hold?
According to a recent survey by Bankrate, 53% of industry experts believe that mortgage rates are going to stay the same. The main reasons for this are the stimulus by the federal government as well as the effect of federal election news.
Figure 2 - Mortgage Rate Predictions Image source - https://www.bankrate.com/mortgages/rate-trends/
Loan origination had spiked in summer due to lower rates, as reported by some of the biggest lenders, including JP Morgan Chase. The industry still faces a long road ahead. It remains to be seen whether the growth momentum can be sustained, given the shortage of inventory which is driving prices up and reducing affordability. We are also not out of the threat of the COVID-19 pandemic which creates different challenges for loan officers as well as buyers.
In the meanwhile, what mortgage loan officers and lenders can count on is effective CRM and mortgage processes that they can depend on. This is why inflooens, the best mortgage CRM, is your best bet as a reliable and efficient software to help in getting information at your fingertips. It provides actionable and empowering insights for you to make the best choices in these uncertain times.
inflooens is the world’s first “Loan Team Optimization Platform”. This next-generation, cloud-based, integrated mortgage platform aims to transform the entire Mortgage Process and enhance the customer experience. Learn more about the platform on www.inflooens.com