Top 6 Trends Expected to Shape the Mortgage Industry in 2018
With housing prices only rising every year, the mortgage industry has its tasks cut out clearly. On one hand, you have the ever-fearful scenario that the real estate market has peaked, and will take a sharp decline anytime now while on the other, there is the cynical approach of prices only rising and affordable housing going straight out of the window of one of those white-picket-fence houses people usually crave for.
The future of the mortgage industry is difficult to predict as lenders may continue to experience challenges related to increasing prices of homes as well as housing inventory shortages. Compliance costs will continue to trouble service providers and their operations. Most of these trends were experienced in 2017 as well. In 2018 industry experts are going to closely watch the moves of the government with respect to housing finance, deregulation, and the Consumer Financial Protection Bureau.
6 Global Mortgage Industry Trends for 2018
The mortgage industry has always behaved like a perennial sharp cat lurking in the shadows staying well-informed of its prey. Those who are looking for everyday housing would be bogged down with the stress of the uncertainty of their ability to own a house, and those looking to invest will realize that the investment options will become costlier than what they were in the past. It is anticipated that the volume of purchase mortgage could increase a bit, while refinance companies will experience a dip.
The top mortgage industry trends for 2018 we could expect to shape up the mortgage industry would be -
Home Loan Interest Rates to Reduce
Home loans are dreaded by many people mainly due to the volatile nature of the interest rate. The loan cannot be planned and accounted for because if the real estate market crashes or peaks, so does the interest rate. The latest trends in the mortgage industry would also feature the decrease in home loan rates. Reducing interest home loan schemes offer a fixed rate of interest to home buyers. The rate of interest will mostly remain the same irrespective of market fluctuations, allowing people to plan their expenditure and savings for the future.
HELOCs and Automation of the Lending Process to Increase
As the value of a home continues to rise, every homeowner gains equity. The expected behavior from any bank or financial institution of that homeowner is to start borrowing against that equity. There's expected to be a 16% rise in the number of homeowners getting a new home equity line of credit. There could be up to 1.6 million HELOC originations. On the other side, mortgage lenders will continue to invest heavily in automating the lending and loan-application processes. This is a huge step in the digitalization of the entire market. HELOCs and automation are two sides of the same coin. With the increase in the number of individuals looking for a credit line, the demand for automating the application process will become much higher.
Number of Housing Projects to Rise
The value of space has increased considerably. A vacant space can either house a humongous bungalow or a variety of condominiums or apartment complexes accommodating 20 times the number of families than what a bungalow could have accommodated. The mix of the plush with the urbanized jungle concept has turned the real estate market on a different head with mortgage trends of 2018 being lent a new voice. By scaling up the number of housing projects being built, the number of properties available in the sale market will go up. Home buyers may have to struggle to find homes for a variety of reasons, including but not limited to -
- Baby-boomers will be content to age in their homes till their dying breath instead of downsizing to a smaller place
- Investors will start monopolizing the real estate market by hoarding millions of homes
- Home-builders will make more profit from expensive and luxurious houses as opposed to entry-level decors
Pre-sanctioned Loans Will Help Home Buyers
A number of banks and financial institutions are encouraging their customers to involve them in the property decision-making process. This will offer a huge advantage to home buyers. A pre-sanctioned loan allows people to set a budget before-hand, apply for a loan with the said budget, and then approach all properties within that budget. Since most loans are pre-sanctioned, real estate agents are aware of the monetary transactions that property sale involves, and the kind of risk factors that need to be addressed appropriately. This kind of collaboration between home buyers and mortgage officials before buying a property will be one of the many mortgage trends 2018 has to offer.
Affordable Housing Will Influence Operations
This is a topic which the real estate sector is really struggling with, worldwide. And, this is one of the unique trends that could shape the mortgage industry in 2018. Owning a home is rarely affordable, and most first-time homeowners sometimes satisfy that dream. Although home prices do not seem to be coming down drastically, homes are being redesigned and constructed to suit all sorts of household income groups - be it the minimalistic couple starting out their lives together, the middle-class family who has reached their career goals and want to set up their home, or the well-to-do who could be investing in their second or third home. With the introduction of such a focused approach, affordable housing can be considered to be a huge aspect of the mortgage industry that will influence the operations of mortgage companies.
The Experience of Borrowing Will be Enhanced
In 2018, the outstanding mortgage debt could increase by up to 4% as compared to 3.2% in 2017. Towards the end of 2018, it is predicted that the mortgage delinquency rate will go down to 1.65%. Keeping in mind the increasing rates of interest, there will be a gradual decline in the share of refinanced mortgages to up to 28%, as compared to 35% in 2017. The Federal National Mortgage Association, also known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, also known as Freddie Mac (a public government-sponsored enterprise) may launch new tech-related initiatives to help lenders enhance the experience of borrowing for home buyers.
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