Mortgage broker

7 Economic Trends Impacting the Mortgage Industry for Brokers in 2023

Most of 2022 was dominated by high economic uncertainty, which has made many mortgage brokers nervous when considering what to expect from the mortgage industry in 2023.

While there is no way to know with certainty what’s in store for 2023, several economic trends will likely impact the mortgage industry and mortgage brokers. These trends include:

  1. A likely recession: Most of 2022 was marked by high inflation, which slowed the housing market considerably. Unfortunately, with high inflation rates, many experts predict a recession in early or mid-2023. This economic trend has led the Mortgage Bankers Association (MBA) to forecast a decline in loan originations for 2023. The forecast is that there will likely be an almost 10% decline in originations between 2022 and 2023.
  2. Higher mortgage rates: To combat inflation, the Federal Reserve has aggressively increased the interest rate across 2022, which means that rates are still high going into 2023. Unfortunately, high-interest rates also tend to put a damper on the number of home sales, which is another reason that mortgage brokers should expect fewer originations in 2023. It can also limit the number of clients who want to refinance their mortgage since they are unlikely to get a more favorable rate in the current economic environment.
  3. Shifting to a buyer’s market: The past several years have been a seller’s market in the mortgage industry. There wasn’t enough inventory to meet the buyers’ demand, so sellers often benefitted from more favorable sales agreements. However, this trend has ended, largely due to increasing interest rates and greater property availability, and we are currently moving into a buyer’s market. A buyer’s market has more properties available than potential buyers, meaning the purchaser can often negotiate more favorable terms. It is expected that most local markets will officially favor buyers at some point in 2023.
  4. Great time for new entrants: Since 2023 is expected to be a slower year for mortgage brokers, in general, it’s a great time for new entrants into the industry. Newer mortgage brokers will have the time to create their client base, attract niche clients, and develop a sophisticated business structure. They can also look at other ways to enhance value to the customer, such as beefing up customer service or providing education and resources about the mortgage industry.
  5. Increased non-qualified (non-QM) loans: In addition to looking at ways to reduce costs and provide greater customer appeal, many mortgage brokers will also look at innovative ways to keep a steady flow of customers. There was increased activity for non-QM loans at the end of 2022, and these loan types will likely continue to be popular throughout 2023. While non-QM loans may make some nervous – often due to their role in the 2008 subprime lending crisis – many professionals are quick to point out that even non-QM loans have a greater level of risk analysis than we say in the early 2000s. And this analysis can mitigate some of the risks with this type of loan.
  6. Non-bank lenders will increase their market share: Tough economic times are often the ideal way to help innovation take flight. The total market share for non-bank originations has increased over the last several years. And this trend will likely continue throughout 2023 as many non-bank lenders look for novel ways to attract customers.
  7. Increased innovation: Much of the customer appeal of non-bank lenders often stems from their incorporation of digital technologies. Commonly, they offer easy-to-use interfaces that make it a breeze to apply, provide documentation, and speak directly to the lender. As a result, mortgage brokers that also increase their technological capacity will likely be able to attract or retain more customers than brokers who pass over this investment.

New mortgage brokers can take advantage of the slower-than-usual year by helping customers navigate the current lending market. Brokers who understand what to expect can begin to think of innovative ways to tackle these hurdles and get through the year until better market conditions can emerge. Speaking to clients about what brokers are seeing play out in the market can play a critical role in helping clients understand their options and how to move forward.

For more information about the mortgage industry in 2023, contact today!

The Mortgage Licensing Group, Inc. is a full-service mortgage licensing firm headquartered in Southern California that is recognized throughout the industry as an experienced and reliable service provider. Established in 2006, our company has been at the forefront of the ever-changing rules and regulations, helping alleviate the often-daunting task of meeting our clientele’s diverse state licensing requirements.