Rates rose unexpectedly last week after a prolonged decline
The unpredictability of the US mortgage market shows little sign of fading, with rates unexpectedly jumping last week after a prolonged descent during the summer.
Freddie Mac said the average 30-year fixed mortgage rate was 6.12% last week – down substantially from the same time last year but inching up slightly from the 6.08% reading one week prior.
Despite the Federal Reserve’s big September rate cut, predictions by some analysts of a short-term uptick in mortgage rates have proven accurate thanks to a bounce in bond yields.
For mortgage brokers, rate volatility is presenting its fair share of hurdles – not least when it comes to locking in refinances. While rates increased last week, they’ve fallen precipitously since earlier this year, and many borrowers are open to biding their time to see where they might eventually land.
That means a big challenge is being able to get the refi closed in time before rates continue to fall, according to Mackenzie Barrett (pictured top), chief sales officer at Safetrust Mortgage.
He told Mortgage Professional America that rate fluctuations during the year to date had given brokers little certainty about when things might stabilize. “You sell one thing one day and then within the next 48 to 72 hours, you’re looking at a different story – whether it’s within [borrowers’] favor or outside of their favor,” he said. “That poses a challenge.”
Top of mind at Safetrust in that climate has been prioritizing a streamlined process and clear communication, he said, to make borrowers’ mortgage journey as smooth as possible. “That way, we can minimize the time it takes to get them closed,” he said. “So that’s been our focus as far as the refinances go, in dealing with the fluctuating market. It’s just been very process oriented.”
What should mortgage professionals be prioritizing?
Rates may have posted a big drop since last year, but they remain well above the lows of the COVID-19 pandemic – and with plenty of borrowers still facing affordability and qualification struggles, Barrett said as detailed a conversation as possible about their financial circumstances and goals is of paramount importance.
“It’s really being into the details of application, making sure that we understand the full scope of the client’s background, their living situation, and even deeper beyond the surface of the application – making sure that we’re obtaining tangible goals for the consumer,” he said.
“[That means] getting them to be able to confide in us as far as their short-term and long-term goals, and what they’ve been through to get to the point of home purchase or to refinance. These are clients that we build trust with, that stick with us regardless of the market.”
It’s always been important, but doubling down on a relationship-driven focus and avoiding a transactional approach with the client is something that can reap big dividends for brokers in the midst of the market’s current turbulence.
Barrett emphasized a strategy that allows brokers to connect with consumers, obtain them for the life of their financing needs, and become their go-to resource. His advice for other brokers is “just slowing down, looking at the details and not missing opportunities with clients that may be lower, moderate income or [with] lower FICO scores. These are still loans that can get closed – still families that can get helped.”
How will mortgage rates move in the months ahead?
2025 is already looming into view with the hope of a less stormy market ahead, although the US has the small matter of a presidential election to get through first.
Mike Fratantoni, chief economist at the Mortgage Bankers Association, noted that the strong labor market might lead the Fed to consider smaller interest rate cuts in November.https://t.co/rC2s7joudc
— Mortgage Professional America Magazine (@MPAMagazineUS) October 8, 2024
Overall, the outlook for the mortgage space is positive, according to Barrett. “I guess I’d say that rates are going to continue to drop,” he said. “I don’t expect anything to be overnight or quick, or any kind of rapid pace from what we experienced during COVID. I think that as we get closer to the election, different shifts start happening with the economy, hopefully for our favor.
“We can then get some more affordability with interest rates. Of course, nothing is guaranteed but if I had to bet on it next year, we’ll continue to see the decrease in [rates].”
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