Lenders are poised for lowered mortgage rates
This could be the year when things start to turn around in the mortgage industry.
Brokers, loan originators and lenders are among those still basking in the afterglow of the Fed’s decision not to increase interest rates to tamp inflation down further at its December meeting – a move that could lower mortgage rates in the coming months. Since March 2022, the Fed has raised its benchmark federal funds rate 11 times to a range of 5.25% to 5.5%.
The series of hikes has had the desired effect, with inflation down to around 3% -- down from the 8.5% recorded when the series of inflation-busting Fed hikes first began.
Poised for brisk business ahead in 2024
As a result, Florida-based A&D Mortgage is poised to respond to improved market conditions in the coming months with customer-tailored offerings. Mike Pearson (pictured left), senior vice president of business development at A&D Mortgage, recently offered his outlook to Mortgage Professional America.
“I think we are on the verge of seeing some progress,” he said during a telephone interview. “I think we’re right on the line where people are starting to get interested but haven’t necessarily jumped in with both feet.”
Right before the holidays, the lender launched its “Winter Wonderland Savings” promotion providing a 25-basis point pricing credit on all non-QM mortgages for clients with a FICO score of 680 or higher and a combined loan-to-value of 75% or lower, as Pearson detailed in a previous interview. The offer is valid until Jan. 14.
But the limited winter offer is just the tip of the iceberg amid further plans to entice customers this year – an effort that could be made easier amid improving market conditions. To some degree, that process has already begun.
“Based on economic numbers, we have had a series of decreases in rates not just based on the market but based on our positioning of where we price that ARM loan,” Pearson said. Last month, he cited one recent two-week period marked by three such rate decreases at A&D Mortgage.
“Outside of just regular market conditions, we have been working on sharpening the pencil for just that reason,” he said. “We’re hoping we’re on the verge of getting people reengaged and getting some activity going.”
The winter promotion, he noted, is “…really more targeted to purchase and a specific bucket of loans.” He added: “But overall, we have been sharpening over the past two months. You’ll see us making a big splash at the beginning of the year as well. There are market conditions [and] there’s competitive things happening in the marketplace as well. So, you want to stay as competitive as you can.”
It's going to be “an amazing year”
Mat Ishbia (pictured right), CEO and chairman of United Wholesale Mortgage, also sees better days ahead after the Fed left interest rates alone last month. He detailed his forecast in his monthly “Three Points” presentation released on Monday.
“[Chair of the Board of Governors of the Federal Reserve System] Jerome Powell said the historic tightening of monetary policy is likely over as inflation has fallen faster than expected,” Ishbia said. “So basically, what he said is ‘I think rates could drop and we could see lower rates three and maybe even four times in 2024.’ “
Powell’s comments led to a collective mind-blowing among observers, Ishbia suggested: “This changed the market’s perspective – people thinking: ‘Could he still raise it? Are they going to keep it flat? What’s going on?’”
Ishbia’s take: “He said the inflation is coming down,” he said. “They’re starting to see things happen in a positive way. And so we all saw the immediate reaction – rates dropped right away. It’s almost at a refi boom level, but not quite there. It’s getting close.”
What Ishbia does see: “it’s definitely sparking a lot of opportunity for purchase,” he said. “People are starting to sell houses now, and buy houses. It’s been a huge thing. And so this big news from the Fed has made it so that now people know that 2024 is going to be an amazing year, an opportunity.”
Ishbia suggested lower rates are something of a foregone conclusion, which has already set things into motion for 2024: “This has changed the outlook for the mortgage industry, and the opportunity is coming.”
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