2022 Trends in Real Estate and Lending: 4 Reasons for Optimism Even as Interest Rates Increase

The 2022 calendar year began with widespread belief that the U.S. Federal Reserve would commit to raising interest rates to curb inflation and boost the country’s slowing economy. This belief was reinforced near the end of January, when Federal Reserve chair Jerome Powell stated publicly that a rate hike would be coming “soon.”

After years of mortgage rates that hovered near—and even set—historic lows, rising interest rates mean that borrowers will have to pay more interest when taking out a new mortgage or refinancing their existing property. For lenders, meanwhile, this rate increase signals the start of a potential slowdown in loan volumes, curbing revenues for mortgage lenders and dimming profit prospects for 2022—and perhaps beyond.

Despite this underwhelming outlook, there are reasons for lenders to remain optimistic and opportunistic headed into this market slowdown. While certain types of mortgages may see reduced demand as interest rates rise, niche audiences will still be seeking out mortgages for a variety of reasons. As you adapt your company’s advertising strategy for 2022, here’s a look at how you might align your ad campaigns with new lending opportunities and goals.

The Rental Market Remains Hot

The housing market may be poised to taper off as rising interest rates thin out the crowd of aspiring homebuyers. But rentals remain an attractive investment: low inventories have continued to push rental rates higher, and reduced competition for property buyers could persuade some would-be buyers to invest in a rental property and generate a new source of income.

As your company sees fewer first-time homebuyers seeking loans for their purchases, you may have an opportunity to supplement that declining demand by targeting mortgage ads to consumers with a demonstrated interest in buying a rental property.

Refinancing Can Still Offer Value to Homeowners

The value of refinancing is always relative to the mortgage rate currently affixed to the mortgage being refinanced. At the same time, some homeowners may be refinancing for purposes other than lowering their interest rate, such as to tap equity through a cash-out refinance.

Whatever their motivations may be, refinancing can continue to offer homeowners value even if rates continue to rise. With inflation outpacing interest rates on mortgages, the relative value of refinancing—even at slightly elevated rates—can still be favorable to borrowers.

Lenders can promote these benefits by using ad campaigns to raise awareness of the long-term value of refinancing at the current rates being offered.

Real Estate Investments Can Offer a Hedge Against Inflation

As inflation worries persist, some investors may be looking for ways to hedge against the devaluation of their money. Real estate is a strong option for this, since real estate investments are often less influenced by inflation than other assets, such as stocks.

Lenders may want to consider targeting related ads to savvy investors and consumers worried about the impact of inflation on their finances. A well-targeted, cost-efficient ad campaign can deliver positive ROI even from this relatively select audience.

Easing Inflation and Supply Chain Woes May Spur New Construction and Renovation

Anyone who has tried to build a home or remodel an existing one during the pandemic knows that the cost of materials has only continued to go up. This has nullified the value of low mortgage rates, since those buyers and owners are paying a premium on construction.

While rising rates may be a source of frustration—especially for new home builders, who can’t lock in a rate until they have a fixed closing date—those frustrations may be balanced out by lower building costs as supply chain issues start to relax in 2022.

New home builders and remodelers may end up paying a higher rate on their loan, but the price tag of their construction may still score them a net savings, both now and over the life of the loan. This gives lenders an opportunity to continue processing new home loans and refinances even as rates move higher.

Although rising mortgage rates may slow down overall demand for mortgages and related financial products, lenders can continue to attract new borrowers and revenue opportunities through ad campaigns targeted to niche audiences. A digital advertising partner can help your business identify and engage these small but valuable audiences to generate new lending opportunities even in the face of slowing demand.

Cox Media’s advertising experts are ready to help your business reach its lending goals. Contact us today to see how we can help.