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Five Trends That Will Shape the Mortgage Industry in 2016

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As we embark on 2016, the mortgage industry is poised for another exciting year. Here is a look at trends and topics that will shape the new year.

1.    Interest rates are on the rise – There is potential for future rate increases from the Federal reserves. Rates are expected to rise by up to 1% in 2016. Increased interest rates may prevent many first-time buyers from entering the housing market. The millennials, already reeling under student debt could delay home purchases.

2.    The rise of Millennials – Growing up in a digital age, their set of priorities and buying behaviour is different to the previous generations. Born between 1980 and 2000, millennial purchasing power is at an all-time high. As the first digital natives, they naturally expect lenders to engage with them on digital platforms. Lenders are cranking up their tech muscle and developing digital platforms to capture this lucrative market. However, rising student loan debts may withhold them from immediate purchases.

3.    Marketplace lenders continue to transform the industry – Marketplaces are revolutionizing industries across business lines. Marketplace lending platforms match borrowers with investors who purchase securities backed by notes issued by these platforms. By adding critical functions in the middle, they are leveraging technology to unlock value, deliver scale and in the process take a significant market share. In a digital world, technology allows marketplace lenders to use advanced data analytics to make possible credit decisions, reduce risk and enhance customer experience. Marketplace lenders will continue to disrupt the market

4.    Automation is the way forward – Buying a home is a complex process.  It involves multi-layered, levels of approvals across a relatively long timeframe. Equipped with an array of options, the digital consumer expects speed across the loan application cycle. Lenders are looking to eliminate roadblocks and deliver superior customer experience. Lenders will leverage automation and adopt advanced technology platforms to automate credit assessment process, track customer sentiment, and detect fraud.

5.    Cheaper to buy than rent – Rental rates across the United States continue to rise. Rental vacancy rates are at a low for both apartments and houses. Growth in rental rates is higher than inflation, and buying is cheaper than renting in major urban markets. With an increasing need to be mobile and lower than average employee tenure, millennials may not want to commit to living in a single location. This could impact buying behaviour and keep rentals at a high.

We’ll do a mid-year review to check how these trends are affecting the market. Watch this space for more.

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