Despite rates in the mid-6s, refi opportunities are still out there for brokers
After teasing the market with rates in the high 5s, 30-year mortgage rates have settled back into a range between 6.3% and 6.5% for most of this spring.
Because of the recent bump in rates, many consumers have turned to equity products in order to unlock built-up equity in their home without giving up a low-rate first mortgage.
While there are still plenty of homeowners benefiting from historically low rates in the aftermath of the pandemic, many have also bought or refinanced a home over the last couple of years. Those customers may be holding onto mortgages with rates at 7% or higher.
With more homeowners having a mortgage rate above 6% than below 3%, one mortgage executive said this is setting up a sneaky refi market for brokers.
Kimber White (pictured top), president of the National Association of Mortgage Brokers (NAMB), said with consumer debt still near record highs, a refinance may be a viable option for those holding on to higher-rate mortgage loans.
“There is a refi market,” White told Mortgage Professional America. “When it comes to the refi, a lot of people have gotten in debt. You need to go back to your referral market and look at what you can do. And just know that there are a lot of people who are over 6% now.”
Can’t be worried about rates
Ask any homeowner what rate they are paying on their auto loan, and chances are they won’t know the answer off the top of their heads. They’ll likely know what the payment is, but not the rate.
But with mortgages, the rate seems to be a much greater concern for customers. White said it’s important for brokers to reframe the conversation.
“The biggest thing you need to tell people is you’re not keeping that mortgage 30 years,” he said. “Plus, what are you paying in rent? What are you paying in rent today versus what that mortgage is going to be, and how much you’re going to save, and the tax write-off you’re going to get?”
White said that if brokers are going to get customers off the rate conversation, it’s important that brokers are also consistent in their messaging about rates on social media and marketing materials.
“The biggest thing I tell a broker in that respect is that you have to be in the mindset that the borrower doesn’t hear you being worried about rates,” he said. “Are you out on social media talking about how bad the rates are? What kind of image are you projecting? What you’re projecting to the people that are following you is exactly what you’re going to get back when it comes to business.”
For customers who continue to insist on talking about rates, it can be difficult to get them off that conversation. White said that for those customers, brokers can frame the current rates in a more historical context, which shows that the current rates are much more normal than some people may think.
“I think now more than ever that the broker needs to stop selling the rate,” White said. “I know people say that’s hard. Sell the fact of buying a home. It’s still the best investment someone will make. And don’t get discouraged. Rates are still under 6.5%. No, they’re not the 5s. But that’s still a good rate.”
Brokers who have done loans over the last two years when rates have been more elevated have a pretty sizeable list of former customers who likely could use a refinance right now.
“Go back to your previous clients,” White said. “You’ve still got clients that were well over 7%. Talk to them, get them refinanced. You’ve got people who were in the 8s.”
Don’t get discouraged
White said if brokers are experiencing slower business, it can provide time to reassess business plans or look into some continuing education. But he stresses that brokers shouldn’t get down if things aren’t going as planned.
“Right now is a good time, since it’s slower, to educate yourself and do a reset,” he said. “Look at what worked for you in the first five months of this year so far and what hasn’t worked. Look at your business plans. But don’t get discouraged. This is not a sprint, it’s a marathon. It’s a long game. And just know that it will get better.
“And it’s not that bad. People are still working, and it is still a good time in our industry. People are still buying. The worst thing we have right now is a housing shortage. Even though there are more houses on the market, we still have a housing shortage. Just make sure your face is out there. Don’t be an order taker. But the biggest thing — don’t get discouraged. Tune out the noise and focus on you and what you can do.”
While there have been some challenges in the mortgage industry, White is optimistic that good times are ahead.
“In our industry, that glass is half full now,” White said. “When the implosion happened in ’08, the glass wasn’t half full. It had a hole in it. It was leaking faster than we could fill it up. We’ve had some bad times. I think we thought we were going to be doing better. I get discouraged, too. My volume is not where I want it to be. But for me, I have to figure out what I can do. And it’s okay. Things will get better. I just have to tighten my belt, do a little better, dig deeper. But it will get better.”
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This article is part of our Monthly Spotlight series, which in May focuses on refinance products. Full coverage can be found here.
