It seems more and more banks and lenders are banking on mortgage rates moving lower in the near future.
The latest being a Michigan-based credit union, which decided to offer a below-market mortgage rate to its members.
Part of the reason is because they have excess cash. The other is that they think mortgage rates are going to come down.
As such, they can snag more customers now and lock them in with a rate that can’t be beat.
It makes you wonder if the worst truly is behind us mortgage rate-wise.
Why a 4.99% Mortgage Rate Now?
Michigan Legacy Credit Union is running a mortgage rate sale of sorts, phrased as a “member giveback.”
For a limited time, the credit union is offering a below-market mortgage rate of 4.99% to its members.
That’s significantly cheaper than the going rate for a 30-year fixed at the moment, last reported to be 6.35%, per Freddie Mac.
The rationale is driven by a few things, one clearly being that its newsworthy to offer a super low mortgage rate at a time like this.
They got my attention and the attention of other journalists, including the Detroit Free Press who initially covered this story.
Another is that because business has been slow for a while, they’ve got excess cash that needs to be deployed.
Remember, banks (and credit unions) need to lend the money they bring in as deposits, and it seems this is a good middle ground for the cash.
Speaking of, only $25 million will be offered via this deal, so it is limited in nature. And it’s reserved for locals, as the credit union only has branches in Flat Rock, Highland Township, Pontiac, Warren, and Wyandotte.
However, Michigan Legacy Credit Union considers itself a “low-income credit union,” so those funds should go fairly far on your average home purchase.
This deal is good for both home purchases and those refinancing a mortgage not currently with the credit union.
It does require one discount point paid at closing, so on a $300,000 loan, we’re talking $3,000, which is fairly reasonable and normal to get a below-market rate.
Are Banks and Lenders Front Running Lower Mortgage Rates?
Aside from that, their president Carma Peters noted that if mortgage rates fall in the future, their customers would be less likely to refinance.
After all, if they have a significantly lower rate than what’s currently available, it would take even lower rates for a refinance to make sense.
However, she did note that rates are projected to drop further, something a lot of folks seem to believe these days.
Recently, Chase Home Lending launched a refinance sale themselves, offering reduced interest rates to their customers for a limited time.
This feels somewhat similar, and I surmised that Chase might be doing it because they expect even lower mortgage rates in coming months too.
So in a sense they’re kind of front-running this expectation and attempting to drive more business, knowing rates could be even cheaper soon.
But it still gets them the business today and disincentives a refinance if their customer already locks in a low rate.
You do wonder though if they’re wrong and mortgage rates somehow turn higher. Anything is possible, and we saw basically the same exact thing last year.
When the Fed finally cut, mortgage rates bounced higher. That may or may not happen this year, and even if it does, it could prove temporary.
There does seem to be a decent tailwind for lower mortgage rates at the moment, more so than there was last year now that Trump’s policy stuff is baked in and the labor market appears to be cracking.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.