After consistent weeks of rising rates and dropping refi volume, the benchmark 30-year loan rate dropped down to 3.13% last week, from 3.18% the previous week. Some analysts have called this dip a brief rest as mortgage rates continue a steady climb through the rest of the year. Others see this as the arrival of a point of stability, with only small peaks and valleys to follow until underlying economic conditions change.
Whatever the long-term outlook, mortgage professionals need to deal with the short-term reality of a rate dip. In a transitional mortgage market, the right strategy is key.
Brian Grubbs (pictured), president MLO at the Raleigh Mortgage Group, told MPA about his approach to clients, marketing, and deals when rates take a dip like this. He explained that while a dip can help clients lock in a loan by introducing an element of urgency, it’s important to temper your approach and offer meaningful advice to the client. He noted, additionally, that these times will test an originator’s discipline, offering the temptation to dive back into refinance business rather than continuing a pivot to purchase business.
“I use these times to encourage people to lock in at whatever’s available at the moment,” Grubbs said. “Pricing can change two or three times a day sometimes, and when pricing goes down I like the client to know that they can get a better rate, but I don’t know for how long. That encourages them to lock something in and take advantage of whatever we have going on right now because the wind can change direction really fast.”
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Grubbs believes that this recent dip indicates mortgage rates will remain just above 3% for the medium-term, with a few peaks and valleys shaping short-term business. Given that outlook, he tells clients that even if rates have swung up a little bit, this could still be the lowest rate they’ll ever see in their lifetimes. The prospect that things could get worse, he explained, is a great motivator for clients.
While that’s his approach when talking directly to clients, Grubbs noted that he’d never advertise a rate on an email, or as part of his marketing materials. Tempting as it might be to send an email saying, ‘you can lock in a 3.13% rate today!’ Grubbs knows that he’ll get replies to that email weeks later when those rates aren’t available. The headaches and client frustration that comes with advertising specific rates on mass marketing materials, in his view, isn’t worth it.
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A dip in rates is generally accompanied by an uptick in refi volume. Grubbs explained that in Q1 of 2021 his volume was around 70% refinance. His current pipeline, however, is 60-65% purchase - like many mortgage professionals he’s making an active effort to grow his purchase volume. A rate dip, however, presents a temptation to shift his ratio. While Grubbs isn’t going to turn down refinance business, he said he’s trying to stay conscious of the fact that purchase business is his current priority.
As other mortgage professionals field calls about dropping rates, Grubbs believes they need to simply keep calm and carry on.
“I think changing prices are just kind of part of the deal,” Grubbs said. “You’ve just got to go with the flow, offer what’s available at the time and not panic. I think that pricing comes and goes, it’s good one week and bad another and then good again and bad again. Just realize that there’s ups and downs, try to manage your customers’ expectations, let them know what is available and encourage them to move forward with what they can get.”