Mainebiz

W W W. M A I N E B I Z . B I Z 17 N OV E M B E R 2 8 , 2 0 2 2 F O C U S B A N K I N G / F I N A N C E / I N S U R A N C E MB: What about home equity lines? LJ: Generally speaking, home equity lines have seen a slight uptick in activity year-over-year. e uptick is likely caused by customers preferring not to refinance because they already have very low fixed- rate loans, so if they want money for home improvement, they could consider a home equity line of credit. eir equity has increased — nearly 40% on average — since 2020. So rather than refinancing to get cash, we're seeing more customers explore home equity. MB: Could you provide a comparison of average mortgage loans? LJ: In late 2020, our mortgage low aver- age interest was under 3% for a 30-year fixed loan, with the average loan size just under $300,000. Now, the average loan is just under $400,000 — and the rate is currently 7% or more. is activity is a reflection of the mortgage industry dur- ing these time periods. MB: Does the higher rate deter people wanting to borrow money? LJ: e largest impact we have seen recently has been with refinancing. is is where we are experiencing a reduction of nearly 80% year-over-year during the third quarter, where we've seen a reduc- tion in closed loans. However year-to- date closed loans are only down 38.5% in terms of dollars because of the increased size of loan amounts. Fortunately, our purchase volume remains stable. MB: How do banks make money from housing-related loans? LJ: Banks are able to provide customers necessary financing to help them achieve their personal goals, such as home own- ership. In return, Banks earn interest income for that service. To allow more customers the opportunity to finance, a secondary mortgage market exists where a portion of mortgages can be sold. Bangor Savings Bank continues to lead a diversified approach by offering a full suite of products and services to best serve our borrowers and custom- ers. is ensures that we maintain a sustainable, long-term approach that allows us to continue reinvesting in our customers and communities even during uncertain times. MB: Does the bank have to adapt to accommodate reduced income? LJ: Absolutely. As a community bank, we are always adapting to remain com- petitive and ensure we serve customers with our 'You Matter More' experience. We continue to have controls and over- sight in place to manage interest rate risk and to remain responsive to the rapidly increasing rate environment. As shared, it also helps that we are diversified as we offer a full suite of products and services to meet our customers' needs. at approach helps us to accommodate periods of potential reduced income. MB: What are your expectations of mortgage activity going forward? LJ: With high inflation and the climbing interest rates, we expect housing activity to continue to contract through 2023 and we expect a course correction in the mar- ket in 2024. e good news is that may lead to an increase in the housing supply, which could slow the upward trend in home prices that was largely due to a very low housing supply this year. at said, we are seeing that people today may be slower to list their homes for sale, because they're staying put with the historically lower interest rate they secured. Going back to pre-2019 numbers Kim Nason is senior vice president of retail banking at Machias Savings Bank. Mainebiz: What are you seeing for mortgage activity now versus a year ago? Kim Nason: A significant drop in volume. Our production peaked in the mid-2021 summer and has fallen from that point. Mortgages, like the real estate industry, are cyclical. We have our highs and lows. e best way to describe it is, the minute the leaves are off the trees, people start to think less about buying homes. Once you've got snow, it really slows down. In the spring, activity picks up. D a m a r i s c o t t a S h o w r o o m H A M M O N D L U M B E R . C O M | 1 - 8 0 0 - H A M M O N D L o o k i n g t o s t a r t a w i n d o w s & d o o r s p r o j e c t ? W e ' d l o v e t o h e l p ! V i s i t o n e o f o u r s t o r e s t o g e t s t a r t e d ! 22 LOCATIONS ACROSS MAINE & NEW HAMPSHIRE SHOWROOMS C O N T I N U E D O N F O L L OW I N G PA G E » Interest rates are at the highest we've seen in nearly 20 years. — Laura Johnson Bangor Savings Bank

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