When all the analysts got out their crystal balls at the end of last year, there was one thing they didn’t predict for 2020: COVID-19 and how it would affect the mortgage market.
Initially, some analysts believed the housing market would be helped by the outbreak given the historically low interest rates, significant consumer demand, and the availability of more entry-level properties.
However, as the pandemic has unfolded, we are seeing applications begin to slow. In fact, as of March 25, there was almost a 30% week-to-week decline in loan applications as the country began to grapple with the uncertainty caused by the increasingly rapid spread of COVID-19, according to the Mortgage Bankers Association. The unadjusted refinance index decreased 34% from the previous week, although it was 195% higher than the same week one year ago.1 At the same time, rates are beginning to climb. The 30-year fixed mortgage rate reached its highest level since mid-January last week, even though rates are still, generally, relatively low.
In addition, with so much construction material coming from China – the initial epicenter of the coronavirus – any breaks in the supply chain could prevent homebuilders from providing much-needed additional inventory for the marketplace. Plus, the fear over a world-wide coronavirus pandemic could have an adverse effect on consumer confidence and cause homebuyers to put off their decision, especially given how large a financial commitment a home purchase is.
Certainly, there is a lot of uncertainty in the mortgage market at this time – where some lenders are doing well, and others are starting to see a decline. There are a lot of mixed messages about whether rates will come back down – especially since the Fed Reserve recently purchased $500 billion in Treasury bonds and $200 billion in mortgage-backed securities. At the same time, it dropped a key-short-term interest rate to near zero. These actions may result in mortgage rates hitting astonishing all-time lows.2
If we’ve learned anything over the years – change is constant in our industry and this has never been truer than right now. For lenders, this spring market may prove to be like no other. Know that Credit Plus stands ready to scale with you through it all – whether volume decreases, increases or remains steady.
Please don’t hesitate to contact your Credit Plus account executive for help with any questions or concerns you may have.