Print this page

Are Your Company’s Rates Killing Your Compensation?

Posted On Thursday, 16 January 2025 10:46
Are Your Company’s Rates Killing Your Compensation? Image source: Adobe Stock

The mortgage industry is as cutthroat as ever. Interest rates have been the highest since the mid-2000s, and profit margins are shrinking as potential homebuyers look for value plays. However, the best mortgage companies to work for right now are also responding well to the current environment.

During the pandemic, millions of people took out loans with shockingly low interest rates. Rates under 3% on 30-year fixed-rate mortgages were commonplace. Of course, that is no longer the reality we live in.

Convincing someone who bought during the pandemic to give up a 3% fixed-rate mortgage to jump back into the market is like pushing a boulder uphill. Unless you're dealing with someone who recently earned a healthy pay raise at work, you’ll likely struggle with current homeowners.

Granted, the top 10% of income earners will always be a viable target market. However, by definition, it’s only 10% of potential clients. So there aren’t enough of them to go around.

Therefore, it’s best to focus on first-time homebuyers and refinancers. People who couldn’t buy a house or get the interest rate they wanted when they did buy are prime candidates for building your business. But everyone knows this by now. That’s why we’re all stuck competing on price.

Are your rates driving away business?

The mortgage market in 2025 is going to be a race to the bottom. Expecting the market to develop amnesia and forget the bargain basement rates during 2020 isn’t living in reality. Everyone remembers how low those rates were. And if they didn’t buy a house during that period, they know someone who did and bragged about it.

They were the lowest rates ever offered in the history of the mortgage market. Even though current interest rates are roughly in line with the historical average at 7.72%, the market conditioned people with 10 years of sub-5% rates. However, since it’s impossible to lower rates back to those levels, mortgage companies will need other ways to compete.

The other issue is that during the period of historically low interest rates, many companies started expanding. But the problem of cheap money is that it won’t last forever. Now that interest rates are around the historical average, many companies are struggling to pay off the debt they took on. And when that happens, the typical mortgage loan officer salary will stagnate. So what do you do?

Comparing Your Rates to Competitors

The first way to compete is obvious–simply offer a better rate. But this isn’t as easy as it sounds. There isn’t much price transparency in the market today. However, one company making strides in this area is MortgageRight. They have a handy Compare My Pricing Tool that lets you see if you’re offering your clients the best bang for their buck and getting paid what you should. With so many companies shrouded in secrecy about their rates, it’s nice to see some transparency in this industry.

It may even be the case that you’re more competitive than you think. If so, that’s great. The adage, “If it ain’t broke, don’t fix it.” certainly applies here.

The tool linked above also lets you compare your mortgage loan officer salary. The cut you get from the sale is as important as the interest rate. If your company charges premium interest rates yet pays a substandard mortgage loan officer salary, there’s something amiss.

Speaking of salary, job creation for loan officers is well below the national average. The Bureau of Labor Statistics estimates 1% job growth for loan officers over the next 10 years. And they also show minimal mortgage loan officer salary gains over the last 4 years. The two are related.

No BS 4052042 O1 2

Image source: Adobe Stock

Adjusting Rates to Meet Market Conditions

There’s a decent chance you’re not so competitive right now. And that’s okay, too. But if you don't have the flexibility and autonomy to adjust your rate based on what’s happening in the market, you may need to start looking for better opportunities. Here’s why.

The most challenging thing about lowering rates is how much it can affect your bottom line. Companies have to pay bills and often hike their rates to keep cash flows stable.

Companies that were more responsible while cheap money was being dispensed are in a prime position to be competitive. Lowering the rate is one of the easiest ways to be more competitive and profitable. But even if you can’t lower your rate, there may be other ways to make yourself look more valuable.

Staying Up to Date On The Latest Trends

We know that people pay for experience. People buy courtside tickets to a basketball game when the view from the stands is just as good. People buy Cadillacs when Chevy’s are just as reliable. So the question then becomes, how do we give ourselves the appearance of being more valuable when the core product is the same?

One way is to be a source of information to your clients. As markets are ever-evolving, it’s important to stay current on what’s going on out there. The average person will be involved in 2-3 mortgage deals in their lifetime, but loan officers do it every day. Giving your clients premium access will generate referrals and turn them into customers for life.

Keep your customers appraised of the latest trends, and understand where the market might be headed. This is no easy feat. However, a basic thing that can be done is to keep an eye on the news and what’s happening in the government. Whether it be federal, state, or local legislation, laws that affect the industry are constantly being passed.

Value Stacking for A More Attractive Offer

Imagine someone was selling you a used cell phone. If that used cell phone was in good condition but otherwise unremarkable, you might pay a few hundred bucks. Now imagine that the same cell phone belonged to the President of the United States and all his contacts and communications were still on it. How much do you think that cell phone would be worth?

There would be a line from here to Antarctica of governments and billionaires trying to buy that phone. This is a concept referred to in marketing as value stacking. The most popular way to implement the idea is on landing pages with “deal sweeteners.”

Often, you don’t have to be that creative to include deal sweeteners. Simply stating what you offer explicitly is sometimes enough to capture new business. Either way, stacking benefits on top of your offer is a great way to make your rate appear more competitive, even if you can’t lower it.

Build Your Mortgage Future

Building a better offer is one of the most challenging tasks in the modern marketplace. The internet has made buyer research more accessible than ever, and people have a strong nose for nonsense. But with some creativity and elbow grease, giving yourself a competitive edge is still possible.

Take a company like MortgageRight, as we mentioned before. Even though they aren’t such a well-known company, they’ve done a solid job of offering competitive rates and value stacking.

Even though many of the benefits they talk about are anything but new, writing it all out still makes the most sense. They never assume knowledge on the reader’s behalf. Many loan officers and managers have been put through the wringer by their companies. So, telling them all the ways they could benefit is the best practice.

Rate this item
(0 votes)

Joomla! Debug Console

Session

Profile Information

Memory Usage

Database Queries