What started as a volatile year has become a busy one for the mortgage market. The housing market is booming, with home prices across the country skyrocketing and new construction failing to keep up with demand. Mortgage rates are also surging as a result of inflation.
In this article, we’ll dive into mortgage market trends that you need to know to help you make informed financing decisions in the current blazing housing market.
Reduced Refinancing Opportunities
As mortgage rates have soared to nearly 6% in 2022, it’s taking a toll on homeowners looking to refinance. Refinancing demand is declining, as it no longer guarantees lower interest rates or monthly payments. Let’s say you got a mortgage at 3% last year. Why would someone refinance to a rate of 5% or higher?
In addition to higher interest rates, homeowners are staying put. For some, buying a home has become less attractive due to economic uncertainty and rising home prices—individuals are choosing to rent rather than buy.
Also, some borrowers don’t qualify for refinancing due to reduced or negative home equity.
However, with an 18.8% rise in home prices in 2021, homeowners saw a 35% increase in tappable equity—the highest yearly increase ever recorded. So, don’t just focus on the rates; take advantage of your untapped home equity with a cash-out refinance. All you need is to scout for the best mortgage lenders for refinancing and get started.
High Mortgage Rates and Home Prices
High mortgage rates are currently dominating the mortgage market. In an effort to combat high inflation rates, the Fed has been increasing rates continually, and this trend is not likely to stop. Housing market experts expect seven Fed rate increases in 2022—meaning four more are in the pipeline. Mortgage application rates are plummeting due to the increased cost of getting a mortgage loan.
As interest rates keep creeping up, home prices are still all-time high. As per Realtor.com, the median home price in May 2022 was $447 000—a 17.6% annual increase. Prices may continue to increase but possibly at a slower rate because housing inventory levels are also rising gradually.
Streamlining Processes With Technology
As more consumers become comfortable using technology to manage their money and make purchases, they expect more from their lenders—a speedy, seamless, and transparent process.
Lenders have embraced third-party technologies and tools to streamline their processes. For instance, most lenders now have online mortgage affordability calculators to help borrowers estimate their mortgage costs quickly.
Technology has improved workflow management, speeding up the mortgage application process. With online loan applications, applicants fill out forms at their convenience and submit them electronically—and that’s just step one of a process that includes automated underwriting and document review. As technologies advance, banks and nonbank lenders keep digitizing their processes.
Non-Bank Lenders Growing Their Market Share
Non-bank lenders provide alternative lending services outside traditional banks by leveraging technology to lend more efficiently. They have heavily invested in digitized interfaces using machine learning and artificial intelligence to better serve customers.
They are continually gaining popularity because they have made submitting an application, uploading documentation, loan approval, and communicating with their borrowers easier—meeting the needs of most millennial borrowers. Moreover, they may offer loans at lower costs and with more flexible eligibility requirements. These digital-focused originators keep launching innovative products, enabling them to grow their market share.
Increase in Purchase Originations by Millennials
As this largest generation in the US begins to reach adulthood and start families of their own, they’re more likely to buy than rent. And as their population rises, so do their housing ownership needs.
As per the National Association of Realtors, currently, 43% of homebuyers are millennials up from 37% in 2021, so there’s no doubt they are still buying more homes digitally than any other generation before them—and that trend isn’t going away anytime soon! They are therefore expected to continue driving up much of the purchase originations.
To Wrap it Up
So what does this all mean for the mortgage market in 2022? In short, we’re in a hot housing market characterized by reduced inventory, increased demand as millennials push up purchase originations, high home prices, and a rise in mortgage rates. Although refinancing activity has dwindled, you still have a chance to cash out your home equity. Take advantage of non-bank lenders and digital mortgages to advance your home ownership goals. Look out for other emerging mortgage trends to make educated mortgage loan decisions.