According to a recent Trulia survey examining consumer concerns, 42 percent of Americans think mortgage interest rates will increase over the next six months, but Matthew Koch, senior vice president and Chicago region head of mortgage at Fifth Third Bank, disagrees.
“I do not expect any mortgage rate movement from the Federal Reserve until the economy improves over its current state,” Koch said. “However, if the Federal Reserve should increase the rate, I believe it would be a nominal move.”
While many mortgage professionals expect interest rates to remain below 4.5 percent over the next year, forty-six percent of Americans who would ever buy a home say that rates above five percent would discourage them from buying their first or next home, according to Trulia.
Koch, whose own clients have spoken of expected mortgage rate increases, suggests that lenders working with clients who are concerned about rising rates provide a comparative analysis of previous rates to emphasize our current, historically low rates.
“In the event there is a rate increase, I would instruct lending officers to use a comparative analysis with prior rates to show consumers a time when we had significantly higher rates,” Koch said. “Even with a slight increase, we will continue to have historically low rates.”
Despite consumer concern surrounding the outcome of the looming October Federal Reserve meeting, Trulia found that prospective homebuyers appear to be more worried about being able to get a mortgage, rather than mortgage rates. Koch, who has 17 years of experience in the mortgage industry, says consumers have shared this concern for years, but positive changes have made it possible to purchase a residential property with very little down.
“From everyone being able to get a mortgage, to hardly anyone getting a mortgage, I believe the pendulum is now in the middle more than ever before, with government agencies evaluating availability of credit on a heightened level,” Koch said. “Credit guidelines should loosen and common sense from an underwriting perspective will be more relevant. Right now, it’s possible to purchase a residential property with very little down.”
Regardless of where consumers’ concerns lie, lenders can help to improve consumer understanding of the mortgage process in general by clearly communicating with clients.
“To improve consumer understanding of the mortgage process, I tell our lending officers at Fifth Third Bank to take the time to sit down with customers, use easy-to-understand language rather than industry jargon, collaborate with business partners, and over-communicate with customers and constituents,” Koch said.