As rates creep up, buyers continue to wait
It’s been tough for mortgage professionals to read headlines about market conditions over the last few weeks.
Applications have dropped as rates have gone from the high-5s to the mid-6s. Real estate agents describe “palpable uneasiness” in the market, forcing buyers to the sidelines once again.
There is also a growing uncertainty about job security, especially in the white-collar sector, which makes up a large percentage of potential homebuyers.
And while the Federal Reserve didn’t discuss rate hikes at its latest meeting, it also wasn’t sure what the eventual fallout from the war in Iran would be on the market.
However, it’s not all doom and gloom in the mortgage market. One mortgage executive believes buyers are still poised and ready to go, meaning there will be opportunities for deals in 2026.
Tushar Garg (pictured top), CEO and co-founder of Flyhomes, said despite a slower market at the moment, there is building demand, which could cause things to take off when rates drop again.
"I mean, at the very macro level, there's a lot of pent-up demand,” Garg told Mortgage Professional America. “There should be more transactions that are happening right now. It's still a slow market. I think for the longest time, we were in the market where the sellers were not looking to sell, and buyers were not looking to buy.
“I do think the inventory started to open up a lot more, and houses are still sitting on the market. So there's more inventory, but the market is not going fast enough."
When will rates drop?
The big question everyone wants to know is when, or if, rates will resume their slide down. Despite the Fed’s recent hold, there are members of the central bank’s board who still want to see more rate cuts this season.
Michelle Bowman, in comments made Friday morning, said she still had three rate cuts penciled in for the rest of 2026. Christopher Waller said on Friday that he had planned to advocate for a rate cut this week until oil prices spiked. Still, he doesn’t see a reason to hike rates right now, and still thinks there will be rate cuts later in the year.
CME FedWatch isn’t as optimistic at the moment. Despite no signs from Fed members that rate hikes are on the way, FedWatch shows a 14.5% chance of a rate hike in April, and a 45.5% chance that rates end the year at least 25 basis points higher than they are right now.
Garg said that while he’s hopeful rates will move lower again, he’s not sure when that’s going to happen. But he’s optimistic that at some point, rates will start moving lower again.
"We have seen super sensitivity around the interest rates,” he said. “When the rates drop and come into the fives, the markets have to move. But of course, the rates have gone back up with the war. I think it's anyone’s guess where the market will go over the next six months. A lot depends on what happens in the geopolitical situation we find ourselves in. In the long run, though, I do believe that interest rates will come down as inflation comes down.”
Brokers should prepare to scale
Despite the uncertainty, Garg and many in the mortgage industry believe it’s only a matter of time before the market gets heated up again. Brokers should be ready for a rate drop to fuel a wave of deals.
"We have seen, at least in our data, that every time the rates drop, the demand goes up,” Garg said. “That shows that there's a lot of pent-up demand, which is quite sensitive to the overall rates. It’s going to be a busy season. And I think when the rates come down, it will facilitate a lot more transactions. That would definitely be really helpful."
Garg thinks it is important for brokers to use technology to scale their businesses to be prepared to handle a surge in business. They also need to continue fostering strong relationships with their referral partners so they can all benefit from eventual rate drops.
“I do think that all the best loan officers right now are building the foundations to continue to scale their business,” he said. “That comes down to building the best experiences they can offer to the real estate agent partners and to the consumers. I think the purchase business is a big part of it. So if you're just waiting for a refi boom, I think you're missing the opportunity that needs to be there right now.”
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