Mortgage Industry Trends

Refinance Opportunities Still Exist, but at What Price?

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The 30 year average fixed rate mortgage loan remained at 3.42%, down from 3.76% a year ago. The 15-year rate averaged around 2.81%, down from 2.88% last year.  These are still fantastic rates for refinances and purchases as we enter into the slow season in the housing markets.

Lenders can still look to offset any declines in purchase volumes by pushing low rate refinances to those who have yet to refi or may have refinanced their home a few years ago.

The challenge comes from new refinancing having the effect of pulling more homes off the market. Some of these homeowners are either taking their equity or reducing their monthly payment providing more disposable income to meet other obligations. As a result, they decide to stay put.

This is good for these owners and the lenders providing the financing. But, let’s face it,  it can’t go on forever. Is it good for the housing market? Not necessarily! As a result, we are seeing a decline in homes available for sale, especially at the affordable end. Compounding the problem are builders who are not building many new affordable units. This makes it more difficult for first-time and low to moderate homebuyers to find homes.

Although refinancing is good for some, at present, it is making it more difficult for new entrants into the housing market. In the long run, this can hurt.

It’s unreasonable to think that lenders would turn away refinancing opportunities. But, it’s just as important to continue to educate potential homebuyers, like Millennials, that now is a great time to buy. With rates down, home values improving and the creative low down payment financing options now is a good time to jump into the home buying pool. They just need to find a home.

We need to also educate existing homeowners that now is a great time to sell and move up to a newer, bigger home. They do need to maintain or allow for a slight increase in their current monthly mortgage payment. More house for about the same payment; not a bad deal. Now may be the time to make a move.

Doing so will create new financing opportunities for lenders from these move up buyer, and from the new first time buyers that purchase their homes. It keeps the river flowing.

Sooner or later rates will rise and refinances will dry up (I think). Let’s hope the purchase market can rebound to offset the decline in business. Now might be good to start cultivating your Realtor relationships, if you haven’t kept those relationships current. You may not get the chance when the refis are gone.

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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