Home buyers are no less eager to buy houses but the mortgage industry likely will be less able to accommodate them, analysts say.
Mortgage interest rates are creeping up, leaving some prospective buyers now unable to qualify for loans even though they might have earlier this year.
For example, today’s interest rates averaging around 2.97 percent means about 14.5 million U.S. homeowners could qualify to refinance their mortgages, according to data from BlackKnight. Earlier this year, when rates were averaging about 2.65 percent, 18.7 million could qualify, the company reported.
Also, relentless demand has pushed up home prices, leaving fewer people able to qualify for mortgages.
With a shrinking pool of prospective buyers, mortgage lenders are being forced to become more competitive, offering lower rates and other perks to draw customers at the expense of their profits.
Competition is most fierce among private mortgage brokers; lenders, such as banks, that make loans directly to customers without brokers in between, are faring better, the Wall Street Journal reported.
Rocket Cos., parent of Rocket Mortgage and Quicken Loans, disclosed that its profit margin fell from 4.41 percent in 2020’s last quarter to 3.74 percent in the first three months of this year.
In 2020, lenders wrote a record $3.83 trillion in new and refinanced mortgage loans, according to the Mortgage Bankers Association, as the U.S. Federal Reserve set record low-interest rates and workers untethered from their offices sought cheaper, more spacious digs outside of cities.
The mortgage business boomed and lenders banked windfall profits.
This year, the volume of loans is predicted to decline 14.2 percent to about $3.3 trillion, according to the WSJ.
TREND FORECAST: While we agree with mortgage lenders such as KWB analyst Bose George, who told the WSJ that this year is still expected to be a great year… “probably the second-best in history”… even though the volume of business is set to decline, we forecast it will suddenly reverse as interest rates rise, the economy slows, and inflation keeps spiking.
