Company president suggests leading brokers will remain resilient despite high-rate environment
Relatively stable mortgage rates helped spur an uptick in housing market activity at the beginning of the year – but that rally faded as rates began to tick upwards again, according to a new report by Freddie Mac.
The government-sponsored enterprise said last week that climbing mortgage rates in April, which had jumped above 7% by the end of the month, helped weigh down the market – with mortgage activity down by 1.8% compared with March and falling 10.4% below the same time last year.
Purchase applications fell by 2.7% month over month, while refinance activity also unsurprisingly slipped, falling by 3.3% from March.
There’s little chance of the market gathering steam as long as those rates remain high, with Freddie currently expecting just one rate cut by the Federal Reserve before the end of 2024.
“These high interest rates will prompt prospective buyers to readjust their housing expectations,” the agency said, “but we anticipate housing demand to remain high due to favorable demographics, particularly in the starter home segment.”
The most likely scenario, Freddie’s report said, is a “slim” improvement in home sales year over year, with mortgage origination volume growth expected to be mild or moderate at best.
Last week, the average mortgage rate for a 30-year fixed loan fell for a second consecutive week – but remained above 7%, the fifth week in a row it has surpassed that figure.
Mortgage rates in the US have slightly eased, offering some relief to buyers navigating a challenging housing market. https://t.co/sx7BwWbmdE#homesales #economicoutlook
— Mortgage Professional America Magazine (@MPAMagazineUS) May 18, 2024
How are mortgage brokers handling the current milder pace of activity?
That analysis suggests little chance of an imminent spike in market activity – but while that may see some mortgage brokers opt for a move away from the profession, the best ones will find a way to continue thriving, according to a prominent lending executive.
Robert Senko (pictured top), president at ACC Mortgage, pointed out to Mortgage Professional America that the industry had seen turbulence – and high rates – before.
“The good ones will survive,” he said of the broker community. “Having done this through 30 years, there’s a lot of people that come into a refi wave in the business and then they exit when the rates go up. And through each of those who have, it’s a cycle where people [think], ‘Maybe I’m going to stay in it.’”
Senko noted that around the beginning of his own career in the industry, around 1992, rates dipped below 7%, viewed at the time as an “extraordinarily low” borrowing cost. “I came in on that wave and that’s where I cut my teeth and when rates spiked up, I guess that was March of 1994 – then companies exited and people exited,” he said.
“And I stuck with it because I kind of liked this ‘Let me figure it out’. So you see those ebbs and flows through all of the cycles.”
Refinance potential remains among certain homeowner types
Freddie’s survey also highlighted a trend brokers have been noticing for some time – a continuing reluctance among homeowners to list their properties for sale, primarily because they would almost certainly not get as low a rate on another mortgage if they moved elsewhere.
More than six out of 10 mortgages across the US are rooted at rates below 4%, Freddie said, with fixed-mortgage-rate homeowners having locked in around $66,000 on average per household. “Selling means giving up those savings,” it said.
An especially noteworthy finding from the report was that millennials and the Gen X cohort generally have low mortgage rates – but there’s still potential for refinancing among those generations.
While millennials have a low homeownership rate compared with baby boomers and Gen Xers, “the sheer number of millennial borrowers with rates [higher than] 7% is high,” the report noted. With all generations combined, “over two million mortgage borrowers have rates above 7%, with over 1.2 million borrowers from the Millennial and Gen X cohorts.”
Read more: Will millennials ever be able to buy a house?
Rates falling under 6.5% would bring an additional 1.4 million borrowers to a rate higher than 6.5%, Freddie said, mainly within Generation X homeowners, further boosting the number of potential refinances.
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