It feels odd to say, but 2020 turned out to be a great year for mortgage lenders. Economic upheaval after economic upheaval prompted many Americans to move to cities in search of new jobs. As work-from-home culture turned permanent, others escaped to suburbs and exurbs where costs are cheaper and social distancing is easier. Some homeowners stayed put and refinanced their mortgages, taking advantage of the rock-bottom interest rates that the Federal Reserve was offering in the name of economic stimulus. As a result, the mortgage lending industry is now worth $3.9 trillion — an all-time high. There’s no doubt about it; all the chaos of the past year was good for mortgage lenders. But what about this year? Can we expect more easy business? Maybe. But in the event the year turns out slow, you’ll need to re-engage the mortgage prospecting machine. Here’s why 2021 may be slower than last year.
Everyone Who Wants to Move Has Moved
Experts in the housing market like to talk about “momentum” as if it’s a mysterious force of nature that causes home buying rates to swing up, level off, and inexorably come crashing down again. It’s true that a graph of the market looks like something out of your high-school physics lectures: a weight on a frictionless spring floating up, then down, then up. But to understand the market, you need to remember that it’s made up of people. And people who have just moved to a new town, bought a house, and signed a mortgage tend not to want to do it again, at least for a few years.
2020 was a year of big changes in the economy, and many Americans decided that they would be better off elsewhere. But even if 2021 has just as many surprises up its metaphorical sleeve, the same people won’t necessarily get right back to packing their suitcases.
You’ll See Fewer Refinances
A similar force is at play in mortgage prospecting refinances. All through 2020, the Fed kept interest rates at rock-bottom, making it sensible for homeowners to try to renegotiate their mortgages, which many people did. However, rates of mortgage refinancing are already dropping. It’s possible that most people who need or want to seek out a lower rate have already done so. Federal Funds rates are now between 0 and .25 percent, so no one is holding out for another drop; they’re as low as they get, and have been for nearly a year.
But that doesn’t mean the game has changed.
Mortgage Rates Are Likely to Stay Where They Are
The Fed will probably keep the national rate steady at or around zero for the duration of the crisis and possibly for quite some time afterward. Remember the 2008 crisis? After the Fed dropped the rate to .25 percent, it kept it there until 2016 before it gradually started to ratchet it up. Now they’re signaling that they’ll play their cards as conservatively in the ’20s as they did in the ’10s.
Of course, that doesn’t mean rates in the market will be rock-solid, too. It’s too big and too complex an entity for that, and after it adjusts from the shock of the dramatic cut and the new baseline is established, the competition will start to exert its force. However, if home buying rates fall later this year, individual actors will probably play it safe, as well.
Mortgage Prospecting in 2021
2020 was a big year in the mortgage industry. All the changes it brought turned out to be, in the short term, windfalls. But in the long term, mortgage professionals may have to pivot to keep business going. We’ll probably begin to see some of the true effects of the COVID crisis later this year. So whether 2021 turns out to be a boom or bust, salespeople need to stay flexible.
The CardTapp platform is build with flexibility in mind. In fact, customization is not only easy – it’s instant. It helps salespeople prepare for and react to whatever 2021 brings. Request a free demo today.