Top Strategies to Handle the Fast-shifting Mortgage Market in the Second Half of 2022

The mortgage market will shift its gears to navigate multiple disruptions and bank on growth opportunities in the second half of 2022. These disruptions and opportunities will manifest itself in the form of volatile mortgage interest rates, low house inventory, home price appreciation, and a purchase market that will be driven by the needs of the new-age homebuyers.

A Brief Overview of the Disruptive Factors

The Federal Reserve had recently announced a 0.75% hike in the average 30-year fixed mortgage rate. This was an attempt to tame an unexpectedly high inflation rate of 9.1% in July and avert a possible recession. Homebuyers and lenders are expecting to see more such changes in interest rates to tackle inflation.

Decelerated construction has resulted in a stark housing inventory shrinkage. This deceleration is attributed to factors like labor shortage and fractured supply chain and raw materials procurement during the Covid-19 pandemic-induced nationwide lockdown. Restrictive zoning laws prohibit the construction of multi-family and accessory dwelling units. This negatively impacted the housing inventory.

Prices of houses are expected to increase over the course of the next five years. Such an expected price hike will boost the equity value of homeowners. A value that homeowners are waiting to cash in if they get the right investment guidance.

What is In It for Lenders?

Despite factors like dynamic interest rates and low house inventory, the purchase business will stay strong. Black Knight’s Mortgage Monitor Report states that the purchase business will drive 82% of all loan originations. This indicates the fact that lenders have ample opportunities to boost their business growth.

To do so, they must devise smart strategies that are attuned to the nuances of a fast-shifting mortgage market in 2022. On this note, here’s discussing the top four strategies that will help lenders handle the market in an efficient and profitable manner.

Strategy #1- Capitalize on Customer Database

Currently, US homeowners have a wealth of USD11 trillion in tappable home equity. Therefore, it is the right time for lenders to get to know more about such homeowners and help them cashing in the capital in the best ways.

Mortgage lenders must leverage analytics to parse their available customer database. This will generate actionable insights into which homeowner wants to list their property, buy a bigger house, or opt for a home improvement refinance loan.

Strategy #2- Advise on Financial Portfolio

Most home equity holders are skeptical about cashing in their equity because of the lack of financial acumen. Lenders must step in to proactively advise customers on why and how they can cash out their home equity.

Loan officers must reach out to their customers proactively to understand their financial goals. They should evaluate customers’ credit reports, property, and balance sheets to help them make informed decisions with equity investment.

Strategy #3- Create Videos to Connect

With another recession looming on the horizon, there are many financial institutions resorting to cost optimization. The first department that bears the brunt is the marketing department. That is the first blunder committed by such institutions as it disconnects them from their customer base.

Lenders must create a difference by investing in resources to create top-notch marketing videos. These videos can feature popular market influencers who can explain the homebuying process to consumers and the potential challenges faced during the process. These videos must be primarily educational instead of overly promotional.

Strategy #4- Reach out to the Next-gen Homebuyers

Next-gen homebuyers will have over 40% contribution to the projected purchase business in the mortgage market. However, their general distrust and lack of financial knowledge dissuade them from investing in the mortgage market.

It is advised that lenders use the latest technologies to clear the air of distrust among the next-gen buyers. Lenders can use digital currencies such as cryptocurrencies instead of paper notes. Such currencies bring much more efficiency and transparency during transactions.

Mortgage automation technologies in the form of AI-driven predictions and alerts enable lenders to provide easily understandable and personalized advice to homebuyers.

Virtual agents help lenders to stay connected with their prospects from remote locations. They fulfill the new-age homebuyer’s requirement to get personalized information from the comfort of the home.

Conclusion

Implementing these strategies will give lenders a definitive direction to operate in the fast-shifting mortgage market. However, solely relying on strategy implementation will not yield fruit in the long term. Lenders must keep an eagle’s eye on metrics such as loans, customer satisfaction, conversion, and LO profitability. It will help lenders to measure the success of the strategies mentioned above.