8% vs 4.99%: Which Mortgage Future Are We Facing?

**Michael Zuber** (0:01)
All righty, folks, we have no idea where the 30-year mortgage rate is going. So I want to do a mental exercise with my good friend Jonathan here from Convoy Home Loans. And we're gonna play the what if game. We're actually gonna do it two different ways. The first way is, what happens if the 30-year mortgage rates for home buyers hit 8%?
And he doesn't know this yet, but we're also gonna do one, what happens if mortgage rates hit 499? We're just gonna cover both of those. Because I think what you'll need to understand is the market will react to either extreme scenario. So, Jonathan, I would argue today that 8% mortgage rates and 4.99 are both extreme, but I think both are possible. So, let's start with the high end. What do you think the market does? What do you think lenders do? What do you think Wall Street does if the 30-year mortgage rate, again, I am talking 30-year, owner-off, best credit, all of that is 8%.
So, most rates are going to be higher than that. So, what happens if that comes to be?

**Jonathan** (1:06)
The world's over, it's done.

**Michael Zuber** (1:08)
It's over, it's done. Yeah, it's over.

**Jonathan** (1:11)
No, I think, I mean, this isn't too far, it's not even a hypothetical, because again, we talked about it before, but think like two years ago, we were writing in the eights. So this is not...

**Michael Zuber** (1:21)
October of 23, I think we were in the eights.

**Jonathan** (1:23)
Yeah, this is not like an unknown situation. What happened at that point in time, right, was a lot of the lenders, a lot of Wall Street, and this is where the 2-1 buy down and the 3-2-1 buy downs for primary owner-occupied, like those things became very popular and rolled out during that time to allow buyers to get, you know, introductory rates that are lower, credits a little lower, and try to make the loan products a little more, a wider range so that more people can take advantage of it. And I think that that'll happen again, right? We've already kind of been in the 3-2-1 market, the temporary buy down market, buy it down, or, you know, get seller credits to do permanent buy downs. Like, we're going to see more of that, but we're probably going to see a different product rollout that allows for payments to be lower and allow for more buyers to still take advantage of the market because they're not going to let housing freeze in the way of, you know, be dead, right? So we were talking about, I mean, just think about two years ago. Was it a year ago, two years ago? They started talking about 40-year fixed mortgages that, you know, the conventional was Fannie and Freddie were entertaining, and FHA was entertaining. Everyone's freaking out about it, like, you know, but again, like, that stuff happens because they see a problem occurring with the market. And so, they're probably going to react with some type of product that tries to bring, you know, demand back into the picture.

**Michael Zuber** (2:52)
Yeah, it's funny, you know, when I think about 8% mortgage rates for homebuyers, it probably means investors are at or above nine, right? And let's just be real. And it's funny sitting here thinking about that. First and foremost, I would love rates at nine or 10%, because that just means demand disappears. But that's a selfish want. The other thing I think about is, I'm at the end of my investing journey. And I mean, if we have mortgage rates at eight, investor loans at nine, I'm going to guess private money's at 12 or 13
Maybe I should just become a lender, right? Maybe I should take my seven figures and just become a lender. I mean, what do you think?

**Jonathan** (3:32)
Yeah, I mean, why not, right?

**Michael Zuber** (3:34)
Yeah, exactly.

**Jonathan** (3:36)
Why not? Because at that point, that would give a better return than even real estate, right? Oh, for sure, yeah.

**Michael Zuber** (3:40)
Do some short-term flip money deals.

**Jonathan** (3:43)
Yeah, but the chances of them, are they going to be able to sell or exit right on the back end? Are you going to have to go through the headache of foreclosing, right? That's the always the...

**Michael Zuber** (3:51)
You mean there's no free money, Jonathan? Come on.

**Jonathan** (3:54)
That's always the thing.

**Michael Zuber** (3:56)
Stop bursting my bubble.

**Jonathan** (3:59)
But I think with investors, that is going to be, like you said, a very opportunistic time, I think more than now. And if anything, everyone's going to look back to today and be like, dude, I should have bought more when rates were at 6%, right? Like this is, it's always going to be a little bit of that. And, you know, it might sound crazy, but at 8%, I mean, is it unlikely entirely that perhaps for a short period of time, while it's inching up to eight, we might see more people flood into the market, trying to catch it before it shoots up higher, right?