The recent declines in mortgage rates have been good news for mortgage professionals and consumers alike. But the industry is not yet out of the woods, said Todd Sheinin, the Maryland-based vice president of strategy and development at Primary Residential Mortgage Inc.
“As you talk to more people across all aspects of our business, from the loan officers to the consumer to real estate agents, everybody is eagerly excited for what’s coming,” Sheinin said.
For a conventional 30-year mortgage, most of Sheinin’s clients are quoted in the mid-6% range and clients are buying down points depending on their down payment and credit score.
August is generally a slower time for business in the mortgage industry and this year is no different, LOs told HousingWire. But with mortgage rates trending down to the mid-6% levels — and expectations of further declines ahead — originators are gearing up for busier days ahead.
“There is maybe a small increase in overall applications and people are looking a lot. I don’t think it’s quite what I think you are looking for in terms of increased activities yet,” Sheinin said.
The average 30-year conforming mortgage rate declined to 6.66% at HousingWire’s Mortgage Rates Center on Wednesday as inflation numbers indicated the U.S. economy has cooled and pushed down the 10-year Treasury yield.
After mortgage rates peaked above 7.5% in May, some LOs are finding small pockets of refinance opportunities.
“Overall, it’s just easier to do refinances right now, and easier to call up our previous clients that we originated in the high 7% mortgages and get it lower, but I haven’t seen a huge resurgence in the market of buyers,” said Benjamin Segaloff, a Michigan-based executive loan officer at Rocket Mortgage.
Jared Evenson, a branch manager for CrossCountry Mortgage in Spokane, Washington, is ringing up all of his past clients to scope out refi opportunities.
“As loan originators, sometimes we assume that the refinance might not make sense for them, so we may not make that phone call because it’s going to be another quarter percent before it’s their time or another half a percent to where it really will make sense for that,” Evenson said.
It was through a phone call that Evenson found out that one of his clients was looking to refinance his existing 30-year mortgage into a 15-year loan. This brought up the timeline to refinance sooner as rates for a 15-year mortgage are lower.
“That completely changed my strategy for him,” Evenson said. “If his [existing] mortgage rate was at 6.625% with the loan amount he has around $650,000, we start seeing an opportunity at about 6% [for a 30-year mortgage] for him. When I’m seeing a 30-year rate at 6%, his 15-year rate might be 5.5%, so it might be time to pull the trigger sooner than later.”
Mortgage rates, which generally move in tandem with the 10-year Treasury yield, are expected to drop even further in the coming months as the Federal Reserve is widely anticipated to cut rates by 25 to 50 basis points in September.
“As we get under 6%, I think refi opportunities will explode because every FHA loan we will be able to streamline, and then every loan we’ve done in the past two years we’ll be able to refi,” Segaloff said.
The general consensus among LOs on the magic rate to spur activity is in the 5% range.
“I think the real key is as rates continue to come down, and once we get somewhere where there is a five handle in front, even a 5.875%, that’s where we’re really going to see activity,” Sheinin said.
“You’re going to unlock a whole set of sellers when rates get down into the 5s, because as rates get closer to what their current rate is, it’s not hard to stomach going from 4.25% to 5.25%,” Evenson added.
