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Mortgage Market Update: Refinance Opportunities and Industry Insights
The Refinance Window Is Open
The mortgage market is shifting, and it’s time for loan officers (LOs) to take notice. While the St. Louis Fed reports a 30-year fixed rate average of 6.34%, I’ve just locked a 30-year fixed rate loan at 5.375% – with rebate. This significant gap signals that refinances are back in play, a moment we’ve been anticipating for the past year.
Seize the Opportunity
For LOs, this is a critical time. Other companies are already targeting your clients, sometimes using questionable tactics. It’s crucial to get in front of your clients, especially if you’re on a banking platform. Ask yourself: Can you offer 5.375% paying rebate today? If not, be aware that brokers looking at the same rate sheets can, and they’re ready to move.
Rethinking Client Relationships
There’s a common misconception in our industry about “owning” a client database. Let’s be clear:
- You don’t own your database.
- Clients owe you nothing.
- Doing their loan was a privilege.
- Earning their refinance is also a privilege.
For years, there’s been an unwritten rule that marketing to another LO’s “database” is crossing a line. But this mindset is outdated and hypocritical, especially when many LOs market to other people’s clients without hesitation.
The Client’s Perspective
Remember, clients have the final say in where their refinance lands. They’re primarily looking for the best rate. While purchase loans can be relationship-based due to their complexity, refinances are often purely rate-driven.
Your Best Opportunity
Instead of viewing your past clients as a “database,” consider them your best opportunity. This shift in perspective can be powerful. Losing a refinance to another LO means someone else has taken your best opportunity away from you. It’s time to stop pointing fingers and get to work.
The Urgency of the Moment
This refinance market will likely see a quick, major spike before settling down. This spike is your chance to bolster your financial reserves before the loan drought potentially returns. Here’s why:
- ATTOM’s January 2024 U.S. Foreclosure Market Report shows over 30,000 foreclosure filings, up 10% from the previous month and 5% year-over-year.
- The cost of living remains high, putting pressure on homeowners.
- Redfin reports that monthly mortgage payments in 2024 are about $250 higher than in 2023.
Looking Ahead
While rates are dropping, buyers aren’t reacting to lower rates at current prices, and this trend may continue. Inflation remains a concern:
- Core inflation came in 0.3% higher than expected.
- While inflation is currently low, it’s expected to return as we haven’t addressed the root causes.
Conclusion
The current rate environment offers a chance to refinance loans written at higher rates over the past year. However, once this opportunity passes, we may find ourselves back where we started. The message is clear: harvest while there’s fruit on the trees. This window of opportunity won’t last forever.
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