row of colorful houses

What Rising Rates Mean for Mortgage Lenders

Interest Rates Climb from Historic Lows

Interest rates have been historically low the past several years, except for a slight uptick in 2018. The pandemic has pushed them even lower. But last week, mortgage rates climbed to their highest weekly average since August.

For companies like Rocket Mortgage (RKT), which make and sell home loans, climbing mortgage rates can cause falling demand.

Rocket Mortgage’s Predictions

Despite the interest rate uptick, Rocket says it expects its origination volume to stay fairly consistent. Last week, Rocket said it predicts that it will close on about $100 billion of loans this quarter, compared to $107 billion in the fourth quarter of last year.

Investors are also examining how much originators are earning on each mortgage they sell. Rocket shared that its quarter-over-quarter gain-on-sale margin declined from 4.52% to 4.41%. This decline was less than one-third as much as the median drop for mortgage lenders and banks on the whole.

What Rising Rates Mean for People with Mortgages

There are different types of mortgage loans, and what rising rates means will depend on the kind of loan you have.

A fixed-rate mortgage (FRM) has an interest rate that stays the same for the entire life or “term” of the loan, even if it’s 30 years. The rate remains fixed regardless of any changes that might occur in the broader economy.

By its nature, a fixed-rate loan shields you from fluctuating interest rates. As interest rates rise, the cost of borrowing can rise as well. With an FRM, the mortgage rate is locked in for the life of the loan—even if lending rates rise significantly during that period.

An adjustable-rate mortgage (ARM) loan is so named because the interest rate can change over time. In many cases, an ARM loan’s rate will stay the same for a specified period of time, such as five or seven years.

Borrowers with adjustable mortgage loans tend to secure lower initial interest rates than those who use fixed-rate loans. But as lending rates rise, so does the borrower’s payment.

Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.

Sign up

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT SoFi SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing, and protecting give our more than one million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of like-minded, ambitious people. For more information, visit Want an easy and convenient way to manage your financial life? Get the SoFi app. For iOS and Android.

TLS 1.2 Encrypted
Equal Housing Lender