How to Explain Fluctuating Rates to Clients

The continued spread of the Coronavirus has people throughout our country and across the globe, feeling afraid of what is to come in the next few weeks and months. Clients with a real estate transaction in process can experience those fears compounded as they watch the fluctuations in the market and worry about how to proceed.
Your clients may be feeling some or all of these concerns:

• Uncertainty about when to lock in a mortgage rate.
• Fear that they may not be approved for a home loan.
• Concerns that they will miss a low rate opportunity.
• Frustration over rising or fluctuating rates.

Here are some steps you can take to ease fears at this time, and help your clients make informed decisions about how to move forward in a fluctuating rate environment.

1. Educate
When rate changes feel arbitrary, it can be confusing. Take a few minutes to explain what drives mortgage markets, and what causes rates to move up and down, or encourage your clients to reach out to us to have this conversation. A client who is feeling overwhelmed or cautions that they “aren’t a numbers person” will likely prefer a brief overview without any industry jargon. A borrower who enjoys following the stock market and diving into financial topics will probably appreciate a more thorough and technical explanation. Offer to forward some helpful resources if it seems they would be interested – this can help them continue to explore without requiring you to teach a full Mortgage 101 course.

2. Be upfront about uncertainty
Everyone in the real estate industry would love to have a crystal ball that shows where rates and housing prices will be tomorrow, next week, and next month. Of course, none of us have one, and right now, the market isn’t behaving according to the patterns we can usually expect to see. Be open about this unusual time and why investors are making decisions that is leading to the fluctuations we’re currently seeing.

3. Run the numbers
Alarmist news reports and dramatic looking charts can make rate fluctuations feel more extreme than they are. We can work with your clients to calculate the change to a monthly mortgage payment at a variety of rates so they can more easily understand the real impact on their monthly finances when rates move higher or lower.

4. Put together a plan
In the face of uncertainty, it can help to feel prepared in a variety of scenarios. Talk through with your client what would be a good course of action if rates move higher, lower, or stay where they are. Is there a rate they would like to lock in at? Would they like to consider paying some points now to receive a lower rate? Do they plan on keeping this mortgage for 5, 10, 15 or more years, and how does that impact their decisions? How can we work to get all the documentation lined up so that we can act quickly when we see an attractive rate?

At Luxury Mortgage Corp we understand that wildly changing rates present challenges to everyone in the industry. Please get in touch if there is anything we can do to support your business at this time.