Mortgage Rates Low, But Will That Last?

Northern Express looks to local lenders

As anyone who has had even a passing interest in the housing industry has noticed, for the past two years real estate sales have been on a tear. Between remote working, the area’s appeal, and the dearth of homes for sale, it has been a seller’s market.

One key to a strong home market has always been the availability and cost of the money to buy homes. For the past several years, historically low-interest rates have helped drive the market. Despite the proliferation of cash buyers, the cost of mortgages and the health and integrity of the mortgage industry remains vitally important to the market.

So where do things stand, and where will they go? We tapped several local lenders for their insights.

First, let’s address the northwest lower Michigan’s housing industry, which continues to be defined by high demand and low supply, even in areas far from bustling downtowns or Lake Michigan’s shores.

“There’s lots of activity,” says Camille Kenyon. Kenyon is vice president of mortgage lending and Gaylord market manager at State Savings Bank in Gaylord. She boasts 22 years in the industry, having worked in all facets of it, including closing, processing, underwriting, and origination. 

State Savings Bank has operations in Benzie, Grand Traverse, and Otsego Counties, so it does business throughout the region. Kenyon says location doesn’t seem to matter, as activity remains strong everywhere. “Interest rates are low, and there’s lots of construction and refinancing” along with home purchasing, she says.

“We’re still in a very strong market, though things have slowed down some,” echoes Bill Holmes, vice president of northern Michigan sales for Front Street Mortgage in Traverse City. “The multiple, multiple offers are not as heavy. I think some buyers, especially in the low to moderate range, have given up or stepped back.”

While inventory levels continue to lag, buyer interest remains extraordinarily high. That’s resulted in escalating selling prices, which would typically also cause mortgage rates to increase.

Jason Stauffer, writing in the investment publication NextAdvisor, says it’s surprising that the level of activity hasn’t resulted in increasing mortgage rates. “Mortgage rates trended down in the past two months – surprisingly – given the inflationary pressures,” says Lawrence Yun, chief economist with the National Association of Realtors, in the article. 

Marta Couturier, senior mortgage loan officer with the Traverse City branch of Independent Bank, located on Grandview Parkway, says rates have been relatively steady the past several months. She also says she emphasizes to clients that if they are comfortable with the rate and terms she provides them, they should go for it, but should not come back if they drop.

“Honestly, no one has a crystal ball. I don’t ever want to promise something and not deliver. If you’re happy with the rate I’m giving you today, lock it in,” says the 13-year veteran of the industry.

While many sellers naturally favor cash offers, funding remains available for those looking to borrow to buy a home. That’s true as well for those without ready access to the large sums of money necessary to purchase a home these days.

A representative for USDA Rural Development, which offers programs with low-interest rates and subsidies from the government, declined to speculate on where the market will go, saying “It’s inappropriate for us to offer speculation on future market conditions. However, we anticipate having plenty of funding for whatever conditions exist.”

While rates have gone up and down this year, they’ve remained within a half a percentage point. Next Advisor noted the average 30-year fixed mortgage rate increased from the beginning of the year through early spring, to a high of 3.18 percent in early April, according to Freddie Mac. Then they began decreasing again, dropping to 2.78 percent in late July. Now, though they have edged upward, they are still at what professionals consider historically low levels.

Will they stay there? Kenyon says she thinks things will remain relatively static in the short term. “I don’t see a whole lot changing until the pandemic gets better,” she says.

Loan officer Jon Lyons of Mercantile Bank in Petoskey believes the pandemic is indeed the key, and how business reacts over the next few years will dictate the housing market as well. “I think things will play out over the next three to five years. Will companies still allow remote work? What’s the work landscape going to look like? If people have to come back to the office, will they move back or change careers? That’s going to be the thing.”

Lyons says he believes the only way rates can go from these historic lows is up, though he’s quick to note he doesn’t think they will skyrocket. “The rates are low, but that can change. I don’t think anybody can really predict. People thought that they’d go up in the third quarter, yet they’ve held steady. If I could predict I’d be on an island somewhere. 

Holmes too doesn’t see great changes coming, though he says he does anticipate interest rates inching up, a feeling echoed by Couturier.

One thing is seemingly certain: Demand for housing will continue to build. “I do a lot of construction loans and have a lot right now. Lumber costs are down, and a lot of people are moving here,” says Couturier, pointing in particular to California, New York, and Ohio as locations where buyers are coming from. “The market is great. There’s just no inventory.”

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