By Eric Spottswood | Regional Market Manager, Prosperity Home Mortgage LLC
With interest rates projected to go up several times this year, what is happening currently in the mortgage industry?
Rates have risen quickly and dramatically this year, going from an average of more than 2.75% in November to more than 5% in April. This has caused an already tight market to put extra pressure on buyers to get into a home quickly to take advantage of the market before rates increase again.
Are people trying to secure mortgages quickly?
Yes, for multiple reasons. People are trying to leverage quick closings and are pushing to get away from the fast-rising interest rate environment. Appraisal timelines are very tight, which is leading to a compressed mortgage process and market.
Are people dropping out of the market because of rising interest rates?
This is one of the biggest hurdles we face. People are hearing about the rising rates and assuming that they’ve missed their window to get into a home. Historically speaking, outside of the last two years, rates are still at one of their lowest points ever. It is still a great time to take advantage of the market.
What do you expect to happen this year with mortgages?
The mortgage industry is projected to shrink by about $1 trillion with most of that being a dramatically reduced refinance market. This is projected to lead to a loss of 100,000 jobs overall and a general tightening with margins and companies as a whole.
Do you have a projection on how high rates might go this year?
Most projections are that rates will continue to rise this year but the speed of that increase will reduce dramatically. Buyers will likely see rates in the mid-to-high 5% range as the market moves along.
Any insight for what buyers can do to help with the process?
The key is to start the process as early as possible. Programs like our Buyers Advantage process give buyers the ability to finish the underwriting of the loan before they go under contract.
This helps to shorten the cycle by strengthening their offer and getting bids accepted faster, allowing flexibility to close their loan early, and reducing stress for all parties.
For those who may be part of an extended process, use that time to your advantage. Improve credit to get access to the best rates and programs, improve cash positions to increase the down payment or buy down the rate to save money in the long run.
It’s important to work with a Realtor who thoroughly understands the market to make sure when you make an offer you do it from a position of knowledge and comfort.
Eric SpotTswood has been a lender for 21 years and has been with Prosperity Home Mortgage for the past four years.