August 19, 2014 | By RGR Marketing Blog

How to Keep Your Mortgage Business Strong in a Tough Market

 

Enthusiasm among those in the mortgage industry took a hit recently, after the Mortgage Bankers Association revealed the discouraging news that mortgage lending had dropped to a low not seen since 1997.

At the end of the first quarter, the total amount lent by mortgage originators stood at $226 billion, down substantially from 2013’s first-quarter totals.

What’s behind this lending slump? Rising interest rates are certainly a factor. The average interest rate for a 30-year FRM is currently around 4.18%, a substantial uptick from rates this time last year, which hovered in the mid-threes before a worrisome announcement from the Federal Reserve sent them scrambling upward in July of 2013.

Higher interest rates mean fewer mortgage holders are interested in refinancing their home loans. Without those low rates, refinancing a mortgage may not be a wise move, especially considering the extra interest that would result from an extended repayment period.

Other Factors Contributing to Lower Mortgage Lending

Credit restrictions are preventing potential buyers from getting jumping the home-ownership bandwagon. Credit policies at major lenders may not be as strict as they had been over the past few years, but they’re still nowhere near as lax as they were before the housing bubble burst.

Rising home prices are also keeping many Americans out of the home buying market. The rising values are due largely to all-cash purchases made by private equity firms, eager to cash in on the low prices brought on by the housing crash.

Of course, these hedge funds and real estate investment trusts have no need to take out mortgages, so they’re not doing much to bolster lending numbers.

Higher interest rates, stricter credit policies, a run on all-cash purchases, and rising home prices have certainly all played a part in creating these lackluster mortgage figures.

What It Means for the Mortgage Industry

So what do falling mortgage lending numbers mean for those in the mortgage and refinance industries?

Prospects are certainly still out there, but they’re going to be a bit harder to find. A smaller market means more competition for existing leads, so firms that aim to stay competitive may want to consider investing in building a more robust lead pipeline. The mortgage industry has always been, and will continue to be, a numbers game.

Many in the mortgage industry have found that purchasing mortgage and refinance leads from reliable providers is an excellent way to keep promising prospects flowing, even when the market as a whole has slowed down.

[Photo Via: Ascendantmtg]

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