By Eric Spottswood | Regional Market Manager, Prosperity Home Mortgage LLC
With interest rates expected to rise several times this year, what is currently happening in the mortgage industry?
Rates have risen rapidly and dramatically this year, from an average of over 2.75% in November to over 5% in April. This has caused an already tight market to put additional pressure on buyers to move into a home quickly to take advantage of the market before rates rise again.
Are people trying to get mortgages fast?
Yes, for several reasons. People are trying to take advantage of the rapid closings and are pushing to get away from the rapidly rising interest rate environment. Appraisal timelines are very tight, resulting in a squeeze in the mortgage process and market.
Are people abandoning the market because of rising interest rates?
This is one of the biggest obstacles we face. People hear about the rate hike and assume they missed their window to get into a house. Historically speaking, outside of the last two years, rates are still at one of their lowest points on record. This is still the perfect time to take advantage of the market.
What do you think will happen this year with mortgages?
The mortgage industry is expected to shrink by around $1 trillion, with most of it being a significantly reduced refinance market. This is expected to result in an overall loss of 100,000 jobs and a general tightening of margins and businesses as a whole.
Do you have a projection of how rates might go up this year?
Most projections indicate that rates will continue to rise this year, but the speed of that increase will slow significantly. Buyers will likely see rates in the mid to high 5% range as the market evolves.
Do you have any idea what buyers can do to make the process easier?
The key is to start the process as early as possible. Programs like our Buyers Advantage process give buyers the opportunity to complete loan underwriting before contracting.
This shortens the cycle by strengthening their offer and getting offers accepted faster, allowing flexibility to close their loan sooner and reducing stress for all parties.
For those who may be part of a prolonged process, use this time to your advantage. Improve credit to gain access to the best rates and programs, improve cash positions to increase down payment, or redeem the rate to save money in the long run.
It’s important to work with a real estate agent who fully understands the market to ensure that when you make an offer, you do so from a position of knowledge and comfort.
Eric SpotTswood has been a lender for 21 years and has worked for Prosperity Home Mortgage for four years.
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