Consumers, mortgage industry, in holding pattern

by MPA08 Apr 2019

Mortgage marketing firm Best Rate Referrals released its Q4 2018 Mortgage Consumer Profile Report, which revealed an industry in a state of transition.

Mortgage inquiries ran parallel to that of the real estate market, with inquiries for purchase loans slipping in the majority of the U.S. while refinance demand (primarily focused on cash-out and HELOCs) grew. Where there was talk of continued rate hikes, the sentiment now is that rates won’t go up until possibly the end of 2019.

“Now at 2.5%, many experts believe we will not see another rate hike until at least late in 2019,” the report reads. “With home values continuing to rise, steady 30-year fixed rates could bring new life to the refinance market.”

Estimated mortgage balances rose for refinance borrowers in Q4 2018, especially for borrowers with “good” credit. Meanwhile, estimated LTV ratios increased only for refinance borrowers with “excellent” credit scores. Both of these statistics are indicators of home owners pulling equity from their homes.

Though most of the top borrower segments matched the quarter prior, there were a handful of new consumer groups inquiring about mortgages in Q4 2018. For the purchase market, two middle-income, older renter segments replaced segments of older home owners and low-income renters. For the refinance market, there were two new affluent and one new high-income consumer segments.

The report also revealed that mortgage debt rose past $10 trillion in 2018 and is nearing the peak achieved in 2008, but consumer debt is also on the rise — expected to top $4 trillion in 2019. Meanwhile, unemployment rates are at historic lows and personal savings have accrued to levels not seen in decades. All told, the economy and the housing market appear to be in a state of transition. Lenders will be wise to watch trends closely throughout the coming months to see how lending markets react and consumer behaviors unfold.

The Q4 2018 Mortgage Consumer Profile Report provides data to help mortgage marketers understand the profiles of consumers actively inquiring about purchase, refinance and reverse mortgage products.