Homeowners coming out of forbearance could be looking for better rates in the coming months.

Thanks to a slew of uncertainties – on the pandemic, the potential for inflation, Fed rate increases and the return to in-person work – nobody can claim with certainty the future of the mortgage market over the next 12 months. But there are trends and developments that give us some good indications of what to expect, what to avoid and ways we can do a better job bringing more low-income and first-time buyers into a red-hot market that has excluded far too many. 

There has been some industry gloom and doom about a supposed end to the refi boom as the scorching pace of refinancing is slowing – mostly because everyone who has been paying attention has already locked in for lower rates. And virtually all indications, from industry publications, from the Federal Reserve and from the national Mortgage Bankers Association, seem to indicate rates are going to rise – not dramatically, not in a big jump, but slowly in small increments.  

But rates will remain fairly low, and there are some, not many, homeowners who will be moving to take advantage and refinance after most of the market is already done.  

Because of COVID-19, there are homeowners who may have spent nearly two years without an income – no income, no refinancing. But now many are headed back to work, and with an income to declare, they will look for a lower rate. 

In addition, hundreds of thousands of homeowners whose mortgages were in forbearance due to the pandemic are going to be coming back into the market, and they will be strongly advised to go after the lower rates and refinance. According to the Mortgage Bankers Association, more than 4 million mortgages were in forbearance at the height of the pandemic. That number dropped to 1.7 million in August. That still leaves a lot of homeowners coming back to the table for a better rate in the coming months. 

Mortgages More Available 

This will continue to be a really tough environment for low-income buyers – even with good credit and a regular income – and for first-time homebuyers. Lack of inventory is not going away. We are going into an expected increased rate environment, and even if it is not going to be dramatic, the rise comes as many young buyers are already saddled with historically high college debt. 

It does appear the urban-to-suburban migration spurred by the pandemic, and the ensuing spike in rural and suburban home prices, may have reached its peak – unless, of course, there is yet another unanticipated pandemic spike. Over the next year or two, values could stabilize. But for now, and quite possibly for the foreseeable future, the market for homes is red hot, and that is going to continue to make it very hard for millions of Americans to buy a home without some help.  

And while the soaring price of lumber has fallen, the supply chain bringing builders windows, doors and other home parts remains problematic and is contributing to lagging homebuilding. 

Banks and regulatory bodies need to make some moves to help free up the clogs at the lower end of the mortgage market. We need to make some changes that make low down payment programs like FHA loans more accessible and more competitive. Over the past many months, sellers have been looking at multiple offers, and when they see an all-cash buyer with no home inspection, they are – understandably – taking that offer.  

First-Time Buyers Need Help 

First-time homebuyers aren’t cash rich and are having a hard time coming up with enough funds for a down payment when prices are skyrocketing and homes are selling for well over the asking price. One unpleasant reality for a lot of folks who want to buy: You may have to rent another year unless you can find a program – and a home – that can fit your profile. 

Camille Madden

But if we are going to keep the American Dream alive, and give the economy a shot in the arm, we need to sharpen our pencils and come up with ways to expand the mortgage pie. 

HarborOne has been trying for the last two years to find ways to get frustrated potential homebuyers into the market with a program called Building Brockton. It provides home buyers purchasing in Brockton a discount of 25 basis points on their mortgage rate on owner-occupied one-, two- or three-family units, and it reduces the credit score necessary to borrow. 

In the states where we do business, we also work with the housing finance authorities like New Hampshire Housing and MassHousing to help with low down payment and low-income options. 

Over the last two years, the housing and mortgage markets have helped fuel the economy in the face of enormous odds and at a time when it was most badly needed. Our industry has been a shot in the arm to the economy, and we expect that will continue. 

Camille Madden is president of HarborOne Mortgage 

Mortgage Trends to Watch in the Coming Year

by Banker & Tradesman time to read: 3 min