As we enter a brand new year, lenders across the industry are hoping for a fresh start—the chance to leave 2023’s tough conditions behind to pursue new market opportunity. So, what lies ahead in 2024? Will falling interest rates yield an influx of volume, or will recovery be more tempered? From technology to global events, what major trends will impact the housing market and mortgage industry?
Here at Maxwell, we spend a lot of time studying the market, speaking with customers across the country about their lender experiences, and looking for trends in our own back-end data. Based on the insights our leadership team has gathered, we put together a few predictions about 2024’s market. While we don’t have a crystal ball, these predictions are our best guesses at what lenders can expect in the coming year.
1. Rates will decline—but not fast enough to trigger a booming market
While Maxwell leadership believes rates will fall in 2024, they hesitate to predict an environment where origination and refi volumes rebound quickly. Instead, lenders should temper optimism with smart business practices, continuing to operate leanly while preparing their operations for a steady influx of loans.
“Current forecasts for 30-year fixed rates range between low to mid-6 percent by end of 2024, says Brian Simons, Maxwell Chief Risk Officer. “However, recent mortgage market forecasts have significantly underestimated the prolonged effects of inflation and should be taken with a grain of salt. Recent CPI numbers point to cooling inflation, but American consumers continue to show incredible resilience. I believe mortgage rates won’t decline to the mid-6 percent range until the second half of 2024.”
“As we head into 2024, many economists are calling for rates to steadily decline throughout the year,” adds John Paasonen, Maxwell Co-founder and CEO. “But as 2023 proved, it’s impossible to know. Lenders should proceed with a conservative mindset. The analogy is that we’re all driving down a highway with a flashing ‘Caution: Heavy fog ahead’ sign. We have to keep moving forward; however, when visibility is so low, it’s a good idea to drive differently. Today, we don’t have the consistent economic indicators to tell us when that fog might let up.”
2. Artificial intelligence will enter the mortgage industry in full force
Artificial intelligence took a big step forward in 2023. During the coming year, Maxwell Co-founder and CTO Rutul Davé predicts that generative capabilities will begin to take the mortgage industry by storm, moving beyond simple front-end applications to drive major back-end decision-making within underwriting.
“The possibilities of AI in mortgage are huge: We have a chance to revolutionize a process long resistant to change,” says Rutul. “Specifically, next year I predict the following trends to unfold:
- Broader adoption of low-stakes tools like ChatGPT, co-pilots, and AI-assistants for borrowers and loan officers, along with AI-powered help desks for more efficient day-to-day functions
- A ChatGPT-like “chat interface” where lenders can use plain language to access data and get insights and reports across their entire mortgage lending business
- AI co-pilots that assist the high-stakes and more costly functions of the mortgage manufacturing process to bring significant cost savings to the bottom line of lending businesses
- Faster and more accurate extraction of data from unstructured information in documents
- A clearer regulatory framework around use of AI in mortgage lending
We’re at the cusp of a revolution in the mortgage industry, and next year will mark significant progress, spurring major benefits for both lenders and home buyers. There are significant challenges, though—and the groundwork we set in 2024 could dramatically alter the course of AI applications in our industry.”
3. Business flexibility will be the top differentiator for lender success
Regardless of market, the ability to maintain a nimble business that reacts seamlessly to market fluctuations is key to lending success. During a time of market transition, that aptitude becomes even more crucial. In the following year, Maxwell leaders believe a flexibility business structure that can scale up and down without added fixed costs will be an essential trait for lenders looking to win market share and maintain profitability.
“There will be so many variables at play in 2024’s mortgage market, which could lead to periods of growth and contraction,” says Alan Parris, Maxwell Private Label Origination Managing Director. “In any scenario, lenders need to be ready to grab additional market share, with a business that can scale up and down in short order. If you’re a P&L owner, now is your chance to plan for business agility while protecting yourself from sunk costs.”
“When leads begin to come in again, lenders will have a three to four month window to align their operations with that uptick,” adds Bryan Traeger, Maxwell Managing Director of Corporate Development. “Lenders need to spend time now thinking about creative compensation structures, the work they can afford to take on in-house versus out-of-house, and ways they can quickly build up capacity (and unravel that capacity if volume comes back down). The ability to be nimble will be game-changing to lender success in 2024.”
4. Securing borrower business will require a competitive product line-up
Today’s lending conditions have created demand for non-vanilla loan products—a situation that will sustain in 2024’s recovering mortgage market. To capture rising borrower demand, lenders will need to take a hard look at their loan offerings, ensuring their menu is competitive and in line with their target market’s needs.
“While loan volume is slower, there’s still business available for those willing to go above and beyond to meet borrower needs,” says Susan Singleton, Maxwell Sales Team Lead. “Today, it’s vital to honestly evaluate whether you’re catering to all market demand, not just the mainstream home buyer business that sustained you through high-origination periods. If your product lineup isn’t robust enough to serve common needs in your market—and if the service you offer isn’t consistently high quality—you’ll lose those prospective customers to your competition.”
“My advice to lenders going into 2024 is to make sure you have a well-rounded menu when it comes to your loan offerings,” Bryan adds. “And don’t just make new products available. Create a system that ensures they’re understood. Use this as an opportunity to invest in your company culture.”
2024 will undoubtedly bring new opportunity for the mortgage industry—and along with that opportunity will come new challenges. Those who set forward-thinking strategy now will reap the benefits by gaining valuable market share in advance of market recovery.
Gain more insight into 2024 with our new guide
Want to get ahead of your competition as the market resets? Our new guide offers insight into:
- The most likely path for rates and inventory next year and beyond
- The competitive and market analyses that should shape your business plan
- Actionable strategies to bulk up your pipeline in the coming year
- Why reevaluating your cost structure is vital to achieving profitability
- How the secondary market can offer opportunities for improved financial performance
Download your copy to position your lending business for success in 2024 and beyond.
Get your free copy of Maxwell’s 2024 Lender Playbook: 4 Tips to Drive Profitability in a Recovering Market