Mortgage rate volatility is forcing lenders to act faster than ever

Be prepared

The first four days in April saw 40% of the applications that month, according to Scott Buchta of Brean Capital.

“Rates went down quickly. They bounced back up, but you saw a lot of people come in,” he said. “The thing that surprised us in April actually was the survey. Rates never really got below 6.7%, but you had a big response.”

Even as rates have climbed again, Mark Worthington, a branch manager at Churchill Mortgage, said the prep work is key. Clients should get mortgage applications in even if rates at the time aren’t optimal. If there is a dip, Worthington and his team are ready to lock that day.

“We’re always looking to try to see what the markets are doing, both financial markets as well as stock markets,” he said. “Every day we’re trying to figure out what we can do to predict. And if we have an inclination, then we immediately notify our clients, let them know that this is a potential, and we’re watching it for them and for them to be ready.”

Worthington says the challenge is knowing when to jump on a promising opportunity or wait on the expectation that rates drop even further.

“That’s probably the hardest part of the business, is the anticipation and the hope,” he said. “If you want a lender who does upfront coaching and upfront advising with a larger staff behind them, you might have a slightly higher interest rate, but your service levels and your convenience levels will be significantly better.”

He continued, “There are also mortgage companies that are very have very low staff, don’t have a large product mix and do a lot more in a less advisory role. They may have a slightly different interest rate. But what I find when you really look at the scope of interest rates in the market, most lenders are within an eighth to a quarter of a point.”

Kevin Leibowitz, president of Grayton Mortgage, recommends keeping close ties with recent borrowers for quick recapture.

“Your recent home purchase people with the above market rates with the officer that they close with are probably going to be your best probability of refinancing quickly, because you already have the trust factor,” he said. “The analogy I use is when it’s time to gas the car up, we can’t control what price is at the gas pump. It just is what it is. The same goes for locking in a rate.”

Debt Consolidation

Mike Brennan, president at Nationwide Mortgage Bankers, says that consumer debt being at an all-time high, paired with high home equity, means that borrowers can consolidate debt. “There’s the opportunity to look at what we call the strike price, meaning, if you look at the average blended household rate, it’s probably high sixes to low seven, and so they’re paying a higher rate right now. I’ve read a lot of reports saying that at a rate of 6% there’s potential for 6 million refis out there, which is a lot around debt consolidation.”

He continued, “So first of all, it’s about understanding when the rates hit a certain mark for that specific borrower, what can be paid off as far as high interest rate, good debt, and the consumer debt, with credit cards, car notes, student loans, and then, what can they save on the monthly level.”

Buchta agrees. “So for us, 6.5% is a key mortgage rate. At that point, we go from 4% to about 8% of the market. You go up to about 800 billion borrowers who can refinance, versus 300 today,” he said. “But in order to get there, you’ve got to get a 4% or a 3.5% 10-year, which is not in our forecast right now. So tactically, what you’ve got to do is…you really have to focus on your purchase channel, but be ready for these quick blips if rates go down.”