Claim Your Share of the Mortgage Refinancing Mini-Boom
It’s been a rough few months for the American economy. The stock market tumbled in October as investors grew fearful of weak global economic growth in conjunction with disasters like Ebola. For the most part, this spelled bad news for lenders, as home sales tend to decelerate during rough economic patches.
The silver lining is that investors moved money into bonds, pushing interest rates to their lowest point in over a year. In effect, this has created a mini-boom for mortgage refinancing as homeowners are rushing in to take advantage of these low rates while they still can.
A sizable opportunity for mortgage refinancing
Mortgage interest rates have been at historic lows for years. Homeowners have had plenty of time to refinance their loans at lower rates, making it seem like there’s no more opportunity in this market. After all, if someone could’ve benefited from a refinance, wouldn’t they have already done so?
Not necessarily. The industry is seeing a rise of homeowners with a 30-year mortgage who have both decent credit and a mortgage interest rate of five percent or higher. These homeowners are ideal candidates for a mortgage refinance. Refinancing makes the most financial sense when the new interest rate is at least half to a full percentage point lower. Since rates have fallen to just over four percent, there are over four million borrowers out there who are prime candidates for a mortgage refinance.
Offset weak home sales
For consumers, this might be their best — and last chance — to refinance at a lower interest rate. With a potential surge on its way, analysts are describing this uptick in activity as a mini-boom. It’s not quite as large as when rates first dropped, but definitely represents a significant spike compared to the rest of the year.
After a slow refinancing year due to rising interest rates, this is good timing for a lender. When the economy and stock market are struggling, fewer people buy new homes. By aggressively pursuing the right prospects for mortgage refinancing, you can replace some of your lost revenue.
Move quickly, lenders
The mortgage refinancing mini-boom will only last as long as rates remain low. You need to act quickly, since rates have already begun creeping back up. The 30-year fixed rate was below four percent in October but is already back over four percent in November as the economy starts to bounce back. If rates continue on this track, this opportunity could be gone in a matter of months; therefore, streamlining your origination process will be critical. This could include taking on efficiencies such as entrusting your verification services to an experienced third-party that can help maximize your gain on sales by quickly verifying consumer data, which allows you to reduce fallout risk, close more loans, and deliver earlier to the secondary market.
These lower interest rates have not gone unnoticed by the mortgage industry. You should expect a great deal of competition when contacting potential clients about refinancing. As a result, clients may be seeking multiple quotes in an effort to make the most of this opportunity. Educating your sales staff about the benefits of this mini-boom and directing them to target key refinance clients first are the best ways to combat the competition. With the right information under their belt, your sales staff will be prepared to demonstrate why your firm is the best option for a homeowner looking to refinance.
True to its name, the mortgage refinancing mini-boom is likely to be a brief but lucrative streak of business for the mortgage lending industry. Taking control of this opportunity by knowing your targets, acting fast and bypassing the competition can potentially yield strong financial results, positioning you for whatever comes next in the housing market.