As we move through 2012, it seems the mortgage landscape is slowly but steadily emerging from the dark tunnel and starting to see glimmers of light.
As home-buying season kicks into high gear, there are many signs for us as an industry to be cautiously optimistic, now through the fourth quarter. The most notable reason for this is that it’s still a heavy refinance market, which we know is interest-rate dependent. Although mortgage rates have recently moved up slightly, it is still close to a historic low. Additionally, with the Federal Reserve’s announcement that it will be keeping rates steady for the next year, there are many reasons to believe the market rates will remain in an attractive range.
Consumer Confidence Comeback
Another encouraging sign that the home residential mortgage market is starting to stabilize is that we are not seeing as much home price deprecation as in past years. This is good news, as value stabilization sets the spark, which leads to an increased home loan perspective — ultimately igniting heightened confidence levels among buyers. A large part of current consumer confidence also lies in the improving job market. A stabilized job market leads to a stabilized home market, ultimately leading to stable interest rates. Though home values are important, consumer confidence remains the fulcrum of a vibrant and balanced home purchase market. Currently, all of these components are working together to create a healthy spring and summer home buying market.
From Renting To Owning
As home prices continue to remain steady and even drop, including in Massachusetts, it is becoming less expensive for the consumer to own, rather than rent on a monthly basis. The industry as a whole has seen the pendulum shift from rent to own, feeding the demand for home sales. With this shift comes a wave of first-time homebuyers. As buying a first home is one of the most significant milestones in one’s life and can be quite intimidating, consumers are going to be hungry for hassle-free tools and assistance in navigating this important and complicated endeavor.
At TD Bank, for example, we’ve answered this need with the launch of our free First Time Homebuyer kit. Additionally, there are unique programs in Massachusetts for homebuyers, such as, "Right-Step." Targeted to low- to moderate-income consumers, it is a deeply discounted interest rate and allows borrowers to finance a large percentage of the purchase price without having to pay private mortgage insurance. The 30-year fixed interest rate is aggressively discounted and the borrower can receive a gift or grant for a percentage of the down payment.
GSE Uncertainty
Finally, continued uncertainty over the fate of mortgage financial giants, Fannie Mae and Freddie Mac, remains a major source of concern to many mortgage lenders. As these two government-sponsored enterprises provide liquidity to most lenders, continued doubt surrounding their financial stability hinder most lenders’ ability to provide attractive lending options to consumers. At TD Bank, however, we have the advantage as a portfolio lender to allow us to grow our mortgage production without having to sell loans at closing.
Overall, the residential mortgage landscape is experiencing gradual improvements. While nothing is certain, with mortgage rates remaining steady and a continued increase in consumer confidence, we have reasons to remain optimistic as the year progresses.
Malcolm Hollensteiner is director of retail lending sales for TD Bank.
