The last three years have been an absolute rollercoaster for the housing market and the mortgage industry. From low lows and scarcity to high highs and abundance, so what should we expect in the last 6 months of 2023? Historically low-interest rates created a spending boom starting in 2020, with heightened demand and minimal inventory driving up prices in a hot housing market. Yet as excess cash flooded the market, inflation rose, hitting 9.1 percent last fall. Now we can expect a sharp course correction to be underway.
Aside from navigating the current rates, other things are quickly changing in the mortgage industry. From new technology, a shift to focusing on customer experience, and affordability challenges, buying a home in 2023 comes with its fair share of challenges. It's more important now than ever to work professions tenured in business that you can trust. Today we're breaking the current state mortgage industry so you can feel more educated and confident when starting your home-buying journey.
Mortgage Fees and Changes In The Industry
The average mortgage rate for a 30-year fixed is 7.12%, nearly double its 3.22% level in early 2022. The average cost of a 15-year, fixed-rate mortgage has also surged to 6.55%, compared to 2.43% in January 2022. In the current environment, ARMs might be more affordable than those with fixed rates. The latest average for a 5/1 ARM was 6.04%.
Just this spring, yet another change hit the mortgage industry. On May 1, 2023, new mortgage financing policies implemented by the Biden administration and the Federal Housing Administration went into effect, adjusting the Loan-Level Price Adjustment (LLPA) matrix.
What does this mean for homebuyers? Essentially, these policies state that those with top credit scores will still pay less than a borrower with a lower credit score; however, those with a lower credit score will pay less than they would have before May 1. The goal here is to promote equitable and sustainable access to homeownership. Let's break this down with an example. Now, a borrower with a credit score of 659 borrowing 75% of the home value will pay a fee of 1.5 percent of the total loan balance, compared to 2.75% previously. Alternatively, a borrower with a credit score of 740 or higher will pay as much as 0.375%, compared to 0.25% previously. The overall impact on a borrower's payment over the life of the mortgage could amount to thousands of dollars and will likely impact the purchasing power of many Americans.
Affordability and Purchasing Power
Housing affordability has been a concern in many regions, and it may continue to be an issue in 2023. Rising home prices and stagnant wage growth could make homeownership less accessible for some potential buyers. Lenders and policymakers may explore innovative solutions to address this challenge. Affordability challenges have been driven by more than just low inventory. While home prices have been rising, wages have not kept pace for many individuals. This wage stagnation makes it harder for potential homebuyers to save for down payments and qualify for mortgages, impacting their ability to afford a home. Looking at the market over the past 40 years, debt and income have not kept up with rises in housing costs. Median home prices have risen by 60% since 1980, while median family income has only risen by 25%.
The Customer Experience Matters Now More Than Ever
In recent years, there has been a greater emphasis on customer service and customer experience. Lenders recognize the importance of delivering a seamless and personalized experience to borrowers throughout the mortgage process, and Wilkes Mortgage Group is no different. Here are some key ways in which the industry, and we as a company, are prioritizing customer experience:
- A Digital Streamlined Application Process: Lenders are simplifying and expediting the mortgage application process. By leveraging automation and advanced technologies, they can reduce the time and effort required by borrowers to complete application forms, submit documentation, and provide the necessary information. This leads to a smoother and more efficient experience for borrowers. Digital transformation has also played a major role in this. Digital tools also provide real-time communication and support, reducing the need for physical paperwork and in-person interactions.
- Personalized Communication and Enhanced Transparency: Lenders are focusing on customized communication with borrowers to build trust and foster a positive experience. We go the extra mile to ensure that borrowers feel supported and informed at every stage. Transparency is crucial for a positive customer experience. At Wilkes Mortgage Group, we are making efforts to provide clear and concise information about mortgage products, terms, costs, and fees. We are also ensuring borrowers understand the mortgage process, including the loan application, underwriting, and closing procedures. Transparent communication helps borrowers make informed decisions and reduces confusion or surprises.
- Providing Education and Guidance: Many borrowers find the mortgage process complex and overwhelming. To improve the customer experience, we offer educational resources, tools, and guides to help borrowers understand the mortgage landscape, loan options, and financial implications. This empowers borrowers to make informed decisions and feel more confident throughout the process. This blog is just one small example of the way we seek to educate YOU! If you're not already, be sure to subscribe to my newsletter so you never miss a blog or update!
- Post-Closing Support: The customer experience extends beyond the closing of the loan. Lenders are providing ongoing support and resources to borrowers after the mortgage transaction. This may include assistance with refinancing options, home equity products, or personalized financial advice. By maintaining a relationship beyond the initial transaction, we lenders can enhance customer loyalty and satisfaction. I am still in touch and communicate regularly with the vast majority of my clients.
Overall, the emphasis on customer experience in the mortgage industry aims to simplify the process, improve transparency, and provide personalized support. Times will continue to change and circumstances will continue to fluctuate beyond our control. At Wilkes Mortgage Group, we are leveraging technology, efficient communication, and educational resources to create a more borrower-centric experience throughout the mortgage journey. No matter what the mortgage industry looks like or how rates will fluctuate, you can always trust us to be a trustworthy and reputable resource for your mortgage needs.