Market opportunity exists with or without Fed cuts: top loan officer

Rates are expected to drop soon – but there's still plenty of potential in the current market

Market opportunity exists with or without Fed cuts: top loan officer

Market observers are waiting with bated breath to learn when the Federal Reserve will begin lowering interest rates – but even with no indication yet of a timeline for rate cuts, one prominent loan officer believes the future is bright for the US mortgage space.

Kristin O’Neil (pictured top), of Open Door Lending, told Mortgage Professional America that while those watching the market should be wary of expecting rates to fall suddenly and dramatically, there was no need for loan officers to wait for lower rates before finding opportunity in the current climate.

“I try to be careful on what I say because obviously we all thought rates were going to drop last year – that did not happen,” she said. “My outlook for the year is extremely positive. I try my best to educate my buyers so that they’re able to strategize to the best of the ability [with] the things that are within their control.

“We can’t control the Fed, or inflation, or the jobs report – but what we can control is how we can best structure their financing, not only to help them be competitive in the current market but also to help with affordability.”  

Are better times ahead for the US mortgage market?

It’s fair to say the mortgage and housing markets have witnessed their fair share of turbulence in recent years. While the COVID-19 pandemic saw a surge in homebuying activity amid slashed borrowing costs and a rise in Americans’ pent-up savings, a marked cooldown has taken hold since interest rates began ticking back upwards in 2022.

The 2024 market, according to O’Neil, feels “healthier” than the environment of recent years, with more balance and the prospect of lower rates down the line. Still, “I’m not so sure that it’s going to be a straight line,” she added. “I think we could see some bumps along the road.”

For loan officers, the message is clear: now is the time to eke out opportunity in the market, rather than waiting for the green light from the Fed.

“I definitely think there are a lot of loan officers kind of waiting on the Fed to create these opportunities for them that are already there and within their controls [if they’re] willing to work hard, be creative, think outside the box,” she said.

“I think that strategy piece is huge for homebuyers, that they can find something that’s affordable regardless of the rate market that we’re in.”

Home equity lines seeing significant surge at present

A big theme in the market of recent months, according to O’Neil, has been the growing prominence of home equity lines, with many borrowers choosing to access equity for a range of different purposes.

“With consumer debt being at an all-time high, many homeowners are taking advantage of their equity to consolidate debt or do home improvements,” she said. “I believe the statistics is that more than three-quarters of homeowners in America have a rate below 5%, which is making cash out refinances less attractive.

“The home equity line is allowing them to tap into that equity while keeping the bulk of their mortgage on that very low fixed rate.”

What’s in store from the Federal Reserve?

The Fed is set to reveal its latest benchmark rate decision later this afternoon, although there’s little expectation that a cut will be announced.

The most likely outcome is a rate hold, a decision that would mark the fifth consecutive time the central bank keeps rates where they are as it waits to see how the inflation outlook plays out in the months ahead.

At last reading, the consumer price index (CPI) jumped to 3.2% in the US, a development that all but cemented the likelihood that rates will remain unchanged for now.

After cutting its funds rate to a range of 0.25% to 0.5% at the onset of the pandemic, when economic uncertainty and public health restrictions gripped the country, the Fed began hiking again in March of 2022 to curb spiking inflation – with that rate now sitting at its highest level for over two decades, a target range of 5.25% to 5.5%.

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