Rates have dropped. How does that impact mortgage lending?

Charlie Brady May 15th, 2019
Marketing Insights

Is your phone ringing off the hook for mortgage applications and refinances yet? Mortgage lenders have been anticipating an increase in applications because of this juggernaut of a job market, with unemployment rates hovering at historic lows. In March, the Bureau of Labor Statistics reported that the national unemployment rate stayed at a rock-bottom 3.8%. Not only is the vast majority of the population working, but it’s a job-seeker’s market out there, making negotiating for higher pay easier. people are enjoying security and extra income, and are in the market for home loans. The bottom line is that conditions are good for mortgage lending.

And with the recent interest rate drop, that already favorable economic environment just caught fire.

Mortgage rates have taken a big drop and are hovering around 4% for a 30-year mortgage and 3.5% for a 15-year mortgage. The market is mixed as to whether rates will stay this way, go even lower, or if this is a short-term blip. If it is a short-term anomaly, it’s necessary to strike fast!

The lowest rates in years have made mortgage activity surge, as homeowners scramble to refinance higher-rate mortgages. According to the Mortgage Bankers Association, refinance applications spiked 39% last week over the week ending March 29, 2019. The average refinance loan size also spiked to $438,900, a new record high, according to MBA.

This could be a very short window of opportunity. Savvy homeowners who want to refinance and home-buyers who want to take advantage of the lower rates will be knocking on your door. These falling rates are giving people the chance to lower their mortgage payments, and depending on their equity, they can use some of those savings for home improvements and other projects.

Step up your marketing efforts

For those of us who have been through this before, we know that it’s important for lenders to step up their marketing efforts for qualified prospects. Lenders need to fill their pipeline with qualified prospects that have the need and ability to refinance.

Lenders should prioritize:

  • Targeting the best and most profitable consumers in their marketing efforts
  • Protecting their portfolio
  • Prioritizing their prospects that are in the funnel

There will be many consumers attempting to refinance and lenders will be filling the funnel with unqualified prospects. Unqualified prospects take up more time than qualified prospects. The time spent on unqualified leads decreases overall consumer satisfaction and will push qualified prospects to lenders that have the ability to service them properly.

Lenders should be targeting and refinancing the following:

  • Equity loans to tax-deductible first mortgages
  • High-rate first mortgages
    • FHA
    • VA
    • Conventional
  • Recent purchases and first-time home buyers that can save money
  • 30-year term to a 15-year term

This is a great time to capitalize on your qualified prospects, those consumers who are low-risk. Not only will you be helping the refinance customer create the financial security of a solid, low-rate mortgage, lowering their payments, or getting the new home owner on the road to the American Dream—you’ll also be helping your bank’s bottom line.

You can download Deluxe and STRATMOR’s eBook on the outlook for mortgage lending here, or take a look at the video summary. Deluxe Marketing Solutions can help; contact us today!

This content is accurate at the time of publication and may not be updated.