As every mortgage lender knows, 30-year mortgages follow the 10-year treasury bond, and are highly related to the actions taken by the Federal Reserve. The signals have dramatically shifted to either a hold, or lower interest rates in recent weeks.
In fact, the environment has changed so quickly that online mortgage sites still lead with articles about what to do in a rising interest climate, and pitches to potential customers about locking in before the next rate hike.
However, as banks are still cautious in lending practices more than ten years after the banking crisis, not every bank customer is prepared to take advantage of the situation if the rates go lower.
There are a number of things a bank can do in advance to help prepare their bank customers for the opportunity if interest rates do float down.
First, a bank can market at branches and online the potential opportunity that could come from lower interest rates later this year, and what the benefits would be before it happens.
Secondly, while there might not be time to repair a dire credit score, even a few months can make the difference in being approved for a loan. Credit scores are impacted in the short term by opening up too many new credit cards or any other short lines of credit.
Lastly, get to know your customer’s needs and recommend a loan that matches the need perhaps even before they are considering a refinance. For instance, a 30-year fixed mortgage used to be the standard. However, as a couple grows older for instance, and they may be planning for a move, a lower interest mortgage with a shorter lock in may prompt a refinance if communicated while the interest rates are heading down.
If you work at a community bank the competition online has gotten fierce with online-only players increasing market share. It is important to highlight how you have helped local customers. For example, if your bank specializes in condominium loans that are prominent in your area, make sure that the marketing and communication messages highlight local knowledge in order to leverage the tie to the community local branches still provide.
While bankers understand the opportunities that could be on the horizon, the bank customers may not as they are not necessarily thinking of the change in advance unless their bank manages the message.