Slashed rates. Discounts on future purchases. Speedy delivery.
No, these are not the promises of an auto dealer or eager e-retailer start-up. They’re coming from mortgage lenders.
The incentives reflect the harsh reality of the residence-financing scene. Since 2021, mortgage rates have more than doubled. The predictable result: American consumers — especially homebuyers — have sharply reduced their appetite for borrowing. Mortgage originations plunged by 57 percent from the fourth quarter of 2021 to the fourth quarter of 2022, ATTOM Data Solutions reports. As mortgage rates have remained stubbornly high, borrowers remain reluctant – in the third quarter of 2024, Americans took half as many mortgages as they did in the same period in 2021, ATTOM says.
The drop in applications puts lenders in a tough position — and, like any seller in a slow market, they’ve responded by dangling deals to get homebuyers to look past the run-up in rates. They’re offering temporary rate cuts in purchase loans and discounts on refinances. One big lender even has initiated a rewards program echoing those used by retailers, airlines and credit cards.
Here’s how to navigate the borrower-friendly strategies lenders are offering, now that rock-bottom rates no longer are driving business.
Refinance savings: A bet on lower rates
The interest rate rise affected not just purchase loans, but the refinance business: With mortgage rates flirting with 7 percent as of Bankrate’s Feb. 19 national survey of lenders — double what they were a year ago — there’s little incentive for mortgage-holders to swap out their old loans.
Many housing economists expect mortgage rates to fall below 6.5 percent by the end of 2025. If that scenario plays out, it might make sense for today’s homebuyers to refinance in the not-too-distant future. Even so, refinancing ain’t cheap – closing costs can total 3 percent to 5 percent of the amount of the loan.
The big lenders know that, so they’re trying to sweeten the pot for future refis. Rocket, for example, has responded with what it calls Rate Drop Advantage. A borrower who finances a purchase with Rocket gets discounted closing costs when refinancing between four months and three years after the initial closing. A lender credit at closing will cover fees for appraisal, credit report, recording and other costs. The savings total about $2,200, Banfield says.
In a similar tactic, lender Better in early 2025 unveiled Better Forever, a loyalty initiative designed to reward borrowers by waiving origination fees on future refinance or purchase loans. The discount is open to customers who funded a loan with BetterMortgage any time since 2019. On a $400,000 mortgage, the savings would amount to $2,500, says Vishal Garg, CEO and founder of Better.
Chase Home Lending, for its part, announced in mid-February that it was running a “rate sale” on mortgage refinances. Chase didn’t say how much the discount is worth – the savings will vary by borrower and loan type, the lender said. As of this writing, the offer is good only through March 7.
Rewards for renters
While Better rewards repeat borrowers, Rocket is aiming at first-timers. On Feb. 18, the digital mortgage giant announced RocketRentRewards, a promotion that gives borrowers a sum that equals 10 percent of their past year’s rental payments, up to $5,000. The discount is applied to closing costs. Considering that the national average rent payment is $1,800 a month, or $21,600 a year, the program would be worth $2,160 for a typical buyer. The promotion is available not just debut homebuyers, but also to buyers who have sold a place and have been renting while they search for a home, says Bill Banfield, Rocket’s chief business officer.
Other enticements: Fast results and bonus points
Lenders are turning up the volume on a variety of other blandishments. One enticement comes in the form of a fast answer on your mortgage application.
Ally Bank promises applicants preapproval within three minutes. Better.com promises a commitment letter, complete with locked-in rate, in 24 hours, a program it’s dubbing “One-Day Mortgage”; it’ll even throw in $1,000 in lender credits to be applied to closing costs. The name’s a bit of a misnomer, though: While commitment comes fast, it could still take weeks to get to the closing table and actually get your loan.
Touting speedy results is not really new in the industry. For several years, for example, Movement Mortgage has promised qualified applicants fully underwritten preapproval in six hours, complete loan processing within a week and closing in one day.
Rocket Mortgage, for its part, is taking a page from the likes of Starbucks and American Airlines. Its new Rocket Rewards program lets potential homebuyers earn points by completing various activities on the company’s website, including watching videos, reading articles about homeownership and using a mortgage calculator.
Members can earn 7,500 points, the equivalent of $75, just for signing up for an account. The idea: Borrowers will redeem the points when they buy a home – the balance will be deducted from closing costs.
Final word on lender deals
All these promotions can help borrowers feel more comfortable about buying a home at a time of high mortgage rates. Remember, though, that shopping around is perhaps the most powerful weapon in a borrower’s arsenal. The refinance promotions in particular remove that option by locking you in with a specific lender for your next refi. And the promise of fast approval decision doesn’t necessarily mean an approval.
So don’t let a sweet-sounding deal stop you from looking hard at all the fundamentals of a lender’s offer.
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