Navigating Mortgage Rates: A Guide for Real Estate Agents and Their Clients

Not sure how to talk about mortgage rates with your clients right now? Yeah, we get it. They’re up. They’re down. They’re up again. This rollercoaster of volatility that seems to have been going on forever can be difficult for the average consumer to understand, especially considering the context of the last four years.

That means you need to be able to explain mortgage rates and their impact on affordability right now, so your sphere has the whole picture of what’s really happening. In this article, we’ll walk through how you can talk to your clients about mortgage rates, leveraging insights to better help them understand.

In this article, we’ll walk through how you can talk to your clients about mortgage rates, leveraging insights to better help them understand.

72% of Consumers Say They Are Willing To Buy if Rates Dip Below 6%

Before diving into discussions about mortgage rates, it’s essential to assess where your clients’ heads are at. Luckily, recent data from broke down what “magic mortgage rate” would get someone to jump into the housing market.

Here’s what the survey said:

  • 18% of consumers are willing to buy a home with a mortgage rate below 7%.
  • 22% are willing to buy with a rate below 6%.
  • 32% are willing to buy with a rate below 5%.
  • 18% are willing to buy with a rate below 4%.

Here’s why this is important. While rates are hovering around the low 7s and high 6s right now, that means this data shows that most people won’t even consider buying or selling a home right now.

But what a lot of consumers may not be factoring in when they decide to wait is that experts project home prices will continue to appreciate. That means, buyers may end up paying for the house (thanks to home price appreciation) if they try and wait it out.

That’s a whole lot of business you are probably missing out on. Which is why the best way to get them to understand the full context of rates is to show them, not tell them.

How To Get the Conversation Started

Because mortgage rates play such a pivotal role in determining the affordability and overall cost of homeownership, that means your sphere is looking to you for answers.

Yes, mortgage rates are one of the most important pieces of the affordability puzzle – but they aren’t the only piece.

A lot of consumers are getting stuck looking at the handle, the first number of a mortgage rate, instead of fully understanding what a small change could mean.

For example, using this Purchasing Power Tool, we can see the impact of mortgage rates going all the way from 7.5% to 5.5% for a home.

For simplicity’s sake, let’s just focus on a $400,000 home loan amount.

We can see that at 7%, the monthly principal and interest payment would be around $2,661.

Okay, now let’s look at what the payment would be if we drop that mortgage rate to 6.5%.

We can see that drops the mortgage payment by $133 per month. It’s a notable difference, but depending on the client’s circumstances or financial situation – it may not be a dealbreaker.

If we bring it down to 6%, that would mean an additional decrease of $130 per month compared to the 6.5% mortgage rate.

With people so focused on the handle right now, this context is extra important.

Plus, if you add in the fact that home prices are expected to continue rising over the next five years, waiting for that small dip in mortgage rates may not make a difference. Or worse, it could mean they end up paying more each month for essentially the same house.

By demonstrating this using a Purchasing Power tool, you can help your clients make informed decisions that align with their financial goals. Instead of getting stuck on the handle of the mortgage rate, let’s show them that it might not make as big of a difference as they may think.

Tips for Effective Communication

Effective communication is key when discussing mortgage rates with clients. Here are some practical tips you can use:

  1. Educate Clients: Take the time to educate clients about how mortgage rates impact their monthly payments and overall budget using the Purchasing Power tool. This empowers them to understand the financial implications of different rate scenarios.
  2. Stay Informed: Stay on top of current mortgage rate trends and economic factors influencing rates. Providing clients with accurate and up-to-date information builds trust and confidence in your expertise.
  3. Customize Discussions: Tailor conversations about mortgage rates to each client’s preferences and financial situation. By understanding their priorities, you can offer personalized guidance that meets their needs.
  4. Discuss Options: Present clients with various mortgage rate scenarios (like above), highlighting the pros and cons of each. Let them know that they have options and encourage them to explore them with a loan officer.
  5. Address Concerns: Be prepared to address clients’ concerns or questions about mortgage rates. Providing clear explanations and guidance can alleviate anxieties and foster trust in the decision-making process.
Navigating Rate Negotiations:

Assist clients in navigating rate negotiations with lenders by:

  • Advising clients to gather multiple loan quotes to compare rates and terms.
  • Helping clients understand the impact of their credit score on the mortgage rate they qualify for.
  • If they want to work on their credit score, give them pointers on how they can improve it to secure the best rate possible when they’re ready.
Bottom Line

Navigating mortgage rates is a crucial aspect of the homebuying process right now, and you play a vital role in guiding clients through this journey.

The first step is understanding where their heads at, then effectively communicating the context they need to fully understand mortgage rates. This will empower them to make informed decisions that align with their goals.

By prioritizing education and personalized guidance, you can truly make a difference in helping clients achieve their dream of homeownership.

For the insights and tools that will help you explain big market topics like rates, try out KCM Membership today.