The refi market struggles for air while the economy experts tell us not to despair!
First and foremost, sorry for the corny title this morning. Over the past few months it’s been increasingly difficult to find up beat news in our industry, so while at first it might seem that my title is corny… the truth is it’s just a stab at these “economists” who offer up insights into the competitive mortgage market place.
Black Knight Mortgage Monitor came out with some data at the end of last week confirming what we already know… BORROWERS ARE NOT LOOKING TO REFINANCE. Despite all the reports we’ve covered, showing borrowers are sitting on 5.4 trillion in equity (yea… trillion with a t), refi applications have dropped 46% from December to April… and honestly it makes sense. According to a report from National Mortgage News there are roughly 28 million borrowers with a 30-year mortgage originated in 2012 or later… and of that 28 million only 45,000 have an incentive to refinance out of their current mortgage into a better rate. Those numbers are staggering and with rates continuing to climb (avg interest rate on a 30-year fixed is 4.5% right now) there isn’t any real signs of return to glory like we saw in 2012.
More doom and gloom… I know, BUT here is the warm and fuzzy… I hope. Rates aren’t that high. It’s all perspective. On average, mortgage rates are still the lowest they’ve ever been. We’ve just been spoiled these past few years… as the world burned around us we (the mortgage industry) shined! Who didn’t want to refinance their home into a 3.5% rate?! All we had to do was pick up the phone fast enough and we could close the deal, but the landscape has changed. It’s a purchase driven market blah blah blah… I’ll spare you the speech. That doesn’t mean that borrowers don’t need homes. First American’s Chief Economist, Mark Fleming, believes that as long as rates stay below 8% (freaking 8% are you kidding me?!) home affordability will stay strong despite the higher cost borrowers will face. Look… the economy is strong and people have money to spend. Once the initial shock wears off we’ll settle into a groove, 5% will be the new norm and we (again… I’m talking about the mortgage industry) will patiently wait for a catastrophic event that drops the rates (insert sunglass wearing emoji).
Until then… sharpen up those realtor relationships and choose a lender that knows how to close purchases on time… like Princeton Mortgage Wholesale!
Talk to you soon!
Photo by Ian Espinosa on Unsplash
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.