Forecasters and economists are expecting home buying volumes to hit their highest levels in over two decades in 2022. Still, mortgage lenders will have to adapt to keep up with demand and benefit from the increased business.
To sustain growth in this market, mortgage lenders will need to expand their business operations by introducing new products, opening more branches, and expanding into different areas.
This article goes into detail about why these changes are so important and how mortgage lenders can make them happen.
A $1.73 trillion record purchase volume in 2022 will be followed by another $2.3 trillion in 2023.
According to the mortgage banker association, lenders should expect a record purchase volume of around $1.73 trillion in 2022 and another $2.3 trillion in 2023 due to expected strong economic growth and rising home prices. Additionally, with interest rates low and stable, household owners are likely to refinance their mortgages for more cash for retirement savings or wealth management purposes.
Higher household debt means more mortgage lending.
Household debt, which includes mortgages, student loans, and credit card debt, is a good indication of future mortgage demand. After declining following the 2008 housing crisis, household debt started to grow steadily in 2014.
By 2022, it's expected to reach record highs. This is good news for mortgage lenders, as it means more loans will be available for them to give out. With greater demand for loans comes greater competition between lending institutions and, therefore, lower interest rates for consumers.
It also creates new opportunities within our industry, such as opening branches closer to customers or adding specialized product lines.
How will this impact your business?
Although there is no way to tell for sure, it is safe to assume that mortgage lenders will need to prepare their business now with a new housing boom on its way.
Preparing ahead of time will allow them to acquire new customers and build relationships with current clients.
It will also give them more time to tweak their business models and offerings to take advantage of higher demand.
If you are interested in becoming a part of the mortgage industry, now is a good time! If not yet involved, now is the perfect time to jump in and become an expert on things like mortgages before you become too busy fulfilling your commitments.
Mortgage lenders need to start preparing now
House prices are forecast to hit a record high by 2022, surpassing their pre-recession peak. This means that an increasing number of consumers will be purchasing property, looking for mortgages with which to do so.
Here's why mortgage lenders should start planning their strategies now to account for such a surge in demand.
- More potential buyers - With house prices increasing, more people will be looking to purchase homes—making them more likely to apply to a lender.
- Higher volumes - Increased buyer interest leads to higher volume figures among some lenders. There's no reason to believe that these trends won't continue moving forward and into the future; therefore, it would benefit mortgage lenders to prepare for higher volumes from existing customers and new ones.
Reduced loyalty - According to research conducted by Experian, many recent buyers went outside their bank or credit union when they purchased a home. As more prospective homeowners enter the market over time, lenders may need to rethink how loyal they can afford to be to each customer.
A diversified client base is often healthy for business; if individual organizations aren't willing or adapt accordingly, competitors may ultimately receive increased market share at their expense.
Competitive advantage - Some markets have become saturated with cash-out refinancing offers, providing some lenders in those areas with significant advantages over others.
After being underwater on their loans, homeowners who bought properties during the recession were recently offered significant cash to finance renovations and other upgrades (meaning they owed more than their properties were worth).
Now that mortgage rates have risen again since then, however, cash-out refinances are becoming less common-at least for now.
- Improving the customer service - Preparing for a busy season means improving the customer service quality. Successful lenders are those that remain available to their clients and employees, even during times of peak demand. Being prepared and listening to your customers is key to providing a memorable client experience throughout every year, not just during an expected peak. These measures will be particularly valuable when it comes time for you to start seeking out new loan opportunities, as many borrowers may only apply once every few years or less.
Outsource Mortgage Processing and Support to FWS
With a record amount of mortgages expected to be purchased in 2022, mortgage lenders need to be prepared for a new set of challenges. Even with favorable interest rates, it will take more than just good credit scores and low monthly payments to close loans; mortgage lenders will have to adapt their lending procedures for an increasing population.
Having proper mortgage support could save you as much as $100K in costs. If interested, reach out to us at Flatworld Solutions. We would be glad to help you with your needs.