The temperature may be cooling down, but the refinance market is still hot. Mortgage rates in 2019 hit record lows, home values are up, owner-occupied homeownership is holding strong at 64% and unemployment rates are remaining below 4%. These four economic factors create the perfect combination for a refinance surge, and mortgage markets have an opportunity to capture new clients interested in capitalizing on new rates or loan terms. If you aren’t building your refinance pipeline by generating leads from outside of your CRM, you could be missing out.
8.2 Million Homeowners May Be Eligible For Mortgage Refinances
2019 marked the largest wave of refinance activity since 2016. The summer season started with refinance volume representing 42% of all mortgage inquiry volume, and the share of volume (SOV) for refinance loans continued to grow in Q3. Since the week of July 17, refinance loan volume has represented at least 50% or more of all mortgage applications according to the Mortgage Bankers Association (MBA). Last month, the MBA reported refinance loan volume was up 116% year over year (YOY) and hit an SOV of 62.7%. Black Knight data suggests, with mortgage rates remaining at three-year lows, an estimated 8.2 million homeowner-occupied households could be eligible for refinances that produces savings opportunities.
Millennials Lead The Refi Boom
The consumer demographic leading the refi boom is Millennials. The Ellie Mae Millennial Tracker indicated that in June, Millennial refinance loan volume jumped from 8% in 2018 to 14% in 2019. Ellie Mae’s Chief Operating Officer Joe Tyrrell said, “Savvy Millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity.”
3 Reasons To Look Outside Your CRM To Grow Your Refinance Pipeline
There’s gold in your database. Loan originators hear this often, but to truly capitalize on the massive refinance opportunity and increase your closed loan volume, capturing additional refinance prospects is key. Here are three reasons to shift your refinance marketing strategy to focus on more than former clients:
1. Experience Matters To Refinance Consumers
Brand loyalty can easily shift as the mortgage servicing experience plays out. Homeowners want a seamless process with consistently outstanding customer service and prioritized efficiency from application to closing. Millennial homeowners, in particular, are likely to research loan originators online prior to contacting them and make decisions based on a combination of past experiences and inferences developed from online research.
Marketing refinance loan opportunities specifically to former clients means you believe current homeowners want only to work with their previous loan originators. Conversely, if you assume not everyone loves their existing mortgage relationships, you can step in as the new, better choice for a refinance mortgage.
2. Your Current Clients May Not Fit The Profile Of Today’s Mortgage Refinancers
Depending on how many years you’ve been originating mortgage loans, your current clients may not represent the ideal consumer who could reap major benefits from refinancing their current loan. To take advantage of market conditions, you need to connect with people currently looking for and able to close on refinance loans.
3. Restricting Your Refinance Marketing To Your Current Database Limits Your Closed Refinance Loan Volume Potential
When it comes to purchase loans, you likely built your strategy around the idea that the larger your lead pool, the greater your opportunity to close at a high volume. Why not apply the same approach to your refinance business? To take advantage of refinance market conditions, you have to flood your pipeline with new refinance prospects, similarly to how you market to prospective home buyers.
Your refinance marketing strategy should include a combination of multi-channel strategy comprising both paid and organic lead generation. Positioning yourself as a refinance mortgage lender across third-party mortgage resources to help drive volumes of prospective refinance borrowers targeted to your specific lending niche.
Consumer Confidence Surges With Each Fed Rate Drop
Within one week of Federal Reserve’s (Fed) July announcement to drop the benchmark rate from 2.50% to 2.25%, the refinance index – which predicts loan application volume – jumped 12%. During this time, the share of refinance loan activity rose nearly 4 basis points from 50% to 53.5%. Economists project the Fed will cut rates once again at their September 18 meeting. Another decrease to the benchmark rate will likely re-ignite the already high interest among homeowners and drive another surge in refinance inquiries.
Now is the time for mortgage marketers to readjust their strategies and claim their pieces of the refinance pie. Focusing marketing efforts on your CRM’s current database leaves a large share of prospective refinancers neglected. Although Q4 is traditionally the final push for the purchase market before winter, growing a pipeline with consumers interested in refinances has the propensity to grow your business well into 2020.