While low interest rates helped spur Connecticut’s 2019 mortgage market, issues facing potential homebuyers continue to affect the industry.

“Inventory and affordability are still industry concerns, especially for Millennials saddled with student loan debt,” said Simon Tahan, a senior vice president and head of home lending at Webster Bank. “They’re challenges the industry is working through.”

Lenders have taken different approaches to addressing challenges in the industry, including exploring finance options, educating potential homebuyers and expanding technology solutions. Some in Connecticut, though, consumer confidence is keeping them on the sidelines.

10 Percent Growth

For single-family homes, Connecticut had $6.77 billion in mortgage activity from January through June 2019, 10.1 percent more compared to the same time period last year, according to The Warren Group, publisher of The Commercial Record. There were also more single-family mortgages in the first six months of 2019, 23,484 compared to 22,667 during the same time last year.

About 53 percent of the single-family mortgages involved purchase activity during the first six months of 2019, with 12,536 loans for $3.77 billion. Nonpurchase activity accounted for 10,948 loans and almost $3 billion.

The top lender for single-family homes during the first six months of 2018 and 2019 was Quicken Loans. About 63 percent of Quicken’s 1,276 single-family loans from January through June 2019 were for nonpurchase activity.

While the mortgage industry did not expect lower rates when the year began, Tahan said, rates have been a key driver for this year’s strong mortgage activity.

The average interest rate on a 30-year, fixed-rate mortgage started the year at 4.51 percent, according to Freddie Mac, and finished June at 3.75 percent. The average rate for a 15-year fixed-rate loan slide from 3.99 percent to 3.18 percent over the same period.

Educating Consumers

Some homeowners took advantage of low rates for cash-out refinances, using the funds to make home improvements, consolidate debt and pay other expenses. Tahan said he anticipates refinancing activity will normalize during 2020.

While Webster Bank saw a mix of purchase and nonpurchase activity this year, Tahan expects more purchase activity next year. With affordability and the state’s tight inventory continue to affect potential homebuyers, one step Webster Bank is taking is going out in the community to offer homeownership education.

Associates from the bank meet with potential homeowners, realtors and others the community to talk about benefits of homeownership, as well as government and state agency programs to help first time homebuyers.

“The education piece continues to be critical to help potential homeowners understand the different programs out there,” Tahan said. “We want to show the value of homeownership over renting and make sure consumers make best decisions.”

The bank also sees mortgage activity as an opportunity to build relationships. The bank works on reviewing and finding solutions for customers’ short- and long-term savings needs.

“It isn’t about a single mortgage,” Tahan said. “We’re really looking at a whole view of what the consumers’ needs are.”

Technology and Financing

Webster Bank also continues to expand its online option for mortgage applications. While customers can still meet with loan officers or work with the call center, Tahan said the popularity of the digital option far exceeded the bank’s expectations.

One reason online mortgage options have become popular with potential homebuyers is Connecticut’s lack of inventory, said John Hodgkins, a senior vice president of mortgage lending and branch manager for Guaranteed Rate in West Hartford.

Guaranteed Rate, which has offices throughout Central and Western Connecticut, had more than 700 purchase mortgages during the first six months of 2019, according to The Warren Group, the most of any lender in the state.

Hodgkins, who works primarily in Hartford County, said someone might see photos of a house online and decide to apply for a mortgage on the spot, even if they had not previously been expecting to buy. Because of the low inventory of houses that are priced right and have been well-maintained, buyers are aware that the demand is greater than the supply and want to act quickly, Hodgkins said.

Guaranteed Rate allows customers to upload documents online, and other information, such as bank statements and some employer-related information, can be downloaded directly.

“I couldn’t even have imagined that a year ago,” Hodgkins said. “People are no longer taking big piles of paper and driving to an office.”

Hodgkins has also found that financing options – and expectations – have changed for borrowers. From buying mortgage insurance to understanding how to use equity for mortgage recasting, borrowers want to be able to use their buying power without overstepping their limits.

“I’ve seen people, particularly Millennials, take more of an academic approach to financing,” Hodgkins said. “They are acutely aware that one size does not fit all.”

He added that while lower rates are part of the financing conversation, they are not the driver.

Consumer Confidence

Over in Fairfield County, lower interest rates have spurred refinances but have had less of an effect on purchases, said Jarret Coleman, a loan officer with US Bank in Greenwich.

Coleman said the purchase market has held steady for prices under $1 million but remained stagnant for homes closer to $2 million and above.

“I don’t think the falling rates falling have necessarily pushed people off the fence into buying,” Coleman said. “You would think that would push them into wanting to buy sooner, but people’s perception of their own finances and the economy seems to drive people more than what interest rates are doing.”

Some concerns about the presidential election have made some buyers cautious, he said, and changes to the tax code has made changed how homeowners write off higher mortgages, Coleman said. He added that the stagnant market could remain the same going forward, but he expects changes after the election.

“If people are not comfortable and confident about the future, then they’re not looking to buy homes,” Coleman said. “As consumer confidence rises, I think that will have a big impact on the homebuyer.”