If you have listened to Barry Habib in the past, you know that one of his big points is that if money is exiting the stock market, it flows into the bond market. And if bond prices increase as a result, interest rates decline.
During his presentation at the Regional Conference of Mortgage Bankers Associations in Atlantic City, he discussed what might be an opportunity for originators to share with their customers.
Among the first things customers need to be taught is that the Federal Funds Rate and mortgage interest rates are two different things. The Federal Funds Rate is an overnight rate and it could change at any time the Federal Reserve wanted. Mortgage rates are sensitive to other things, he said.
Habib said if rates go up one half of a percentage point, it could jeopardize 30% of a mortgage originator’s pipeline. And it is possible mortgage rates could go up as the stock market hits a peak and drops off rapidly. Habib showed a graph which showed what happened the last two times the stock market peaked. That peak is being approached again.
And as money leaves the stock market to be invested in bonds, there will be a short period where rates will fall before the stock market corrects and starts to rise again. And that might be a lock opportunity.
Another thing Habib discussed was putting clients into assumable products such as Federal Housing Administration and Veterans Affairs loans. As fellow
He said advising clients to take an assumable loan could help them sell their home five-to-seven years down the road when rates are higher when they are now. And it will also allow them to get a higher price for the property.
Habib had plenty more to say about market opportunities for originators.
