Lenders poised for spring period anticipate rates going down
For now, those working in the mortgage industry are waiting for “the settling.”
That’s the term Toby Potter, CEO of Dallas-based private lender Global Integrity Finance, uses to refer to the period during which people wait for mortgage rates to go down. Even though mortgage rates remain elevated – hovering at around 6% from previous historic lows – there are signs of a dip for which lenders are poised.
Yet what lenders want even before a rate fall, Potter added, is for consumers to acclimate to the “new normal” and pull the trigger on applying for mortgages.
Demanding better mortgage rates
“We deal with this just about every day,” Potter told Mortgage Professional America during a recent telephone interview. “Our clients call and say ‘I want to buy this $400,000 property and need to turn into a rental.’”
When the interest rate is cited? “They say ‘that’s ridiculous,’” Potter said. “‘I mean, it wasn’t a year ago I got 4.5%.’“
That was then. Increasingly, consumers have become more hesitant to purchase homes while the rate remains elevated. But here’s the rub, Potter agreed: In past decades, borrowers have purchased homes at substantially higher rates.
Read more: Why mortgage rates are going up: will mortgage rates ever fall?
Rates were higher back in the day
Take the 1990s, for example. Rates were 10.13%, settling down to 8,06% by the end of the decade. By the time the 2000s came, rates were down to 8.06%, dropping to 5.14% by decade’s end.
“The expectation is just not realistic,” Potter said of borrowers demanding lower rates. “I think it’s going to take some time for people to realize this is the new normal. That’s what I’m saying.”
The last Consumer Price Index prompted the annual inflation rate to go down to 5%, which bodes well for mortgage rates – with some expectations it may lower as a result. But even that is hard to predict, Potter said.
The future is unpredictable, however: “We don’t know,” Potter said. “We don’t know until we get some settling, until the waters calm down until they’re glass-smooth.”
For now, it’s a bonanza for institutional investors., he suggested. “We’re seeing some things kind of settle downward. We’re seeing a lot of institutional investors – people that solely invest in real estate as a living to build nice portfolios – come out of the woodwork because they were on hold during the pandemic because prices were too high. We’re seeing more and more of those come forward and more of that activity really spur and be more active than it was over the past two and a half years.”
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