By KIMBERLEY HAAS
As interest rates climb towards seven percent and loan applications fall to their slowest pace since 1997, leaders at Rocket Mortgage say they have a solution and it has a name: Inflation Buster.
Rocket’s new Inflation Buster program was announced on Sept. 16. It gives homebuyers a reprieve by reducing their monthly mortgage payment by one percentage point for the first year of their loan, according to a press release.
Bill Banfield, EVP of Capital Markets at Rocket Mortgage, sat down for an interview with The Mortgage Note to explain how the program is the result of leaders at the company listening to the needs of their clients.
“You, me, everybody is talking about inflation. You can’t open up a newspaper without seeing something about it,” Banfield said.
Banfield said when people move into a home, they know there will be costs and clients are hesitant to get into a mortgage that won’t allow them to afford newer appliances and other updates to the house.
“This was really driven out of listening to our clients,” Banfield said.
Banfield said the way Inflation Buster works is Rocket Mortgage uses money from a fully funded escrow account to reduce a borrower’s monthly mortgage payment one percentage point for the first year of their loan.
“At month 13, you will make regular payments on your note,” Banfield said.
This year of lower payments is available to people signing a conventional, FHA, or VA purchase loan.
According to the press release, a homebuyer with a $400,000, 30-year fixed mortgage with 5.75% interest would traditionally pay $2,334.29 in principal and interest.
With a one percentage point reduction for the first year, that payment would drop more than 10% to $2,086.59.
The homeowner in this illustration would save a total of $2,972.40 in the first year of their loan.
In August, leaders at Rocket Mortgage announced they had launched the Rate Drop Advantage program.
This program is designed to cover a sizable portion of closing costs for a refinance transaction if interest rates drop and the customer refinances within three years of purchasing a home.
Bob Walters, CEO of Rocket Mortgage, said the Inflation Buster and Rate Drop Advantage programs put buyers in the driver’s seat with unmatched benefits.
“Rocket Mortgage is committed to creating solutions to combat today’s high inflation, making home purchases more affordable,” Walters said in a statement.
Rocket and other companies are competing for borrowers as the market normalizes following the COVID pandemic.
Mortgage loan application volume tumbled last week, falling to its slowest pace since 1997 as rates hit 6.75%, according to the Mortgage Bankers Association’s weekly survey.
The adjusted Market Composite Index, a measure of mortgage loan application volume, dropped by 14.2%.
The adjusted purchase index fell 13%, while the unadjusted purchase index decreased 13% and was 37% lower year-over-year.
The refinance index dropped by 18% and was 86% lower than the same time last year. Refis made up 29% of total applications.
Follow Us On Twitter:
Read More Articles By Kimberley Haas:
Email story ideas to Editor Kimberley Haas: [email protected]