Your clients would be better off waiting for a sunny day before applying for a mortgage, a new study has found.
The research by the Cleveland Fed, which scoured National Oceanic and Atmospheric Administration data from more than 2,000 counties in the US, found there's an unusual correlation between mortgage approvals and good weather, Realtor.com reports.
That correlation suggests that mortgage agents are more likely to see applicants in a positive light when the weather is sunny, as compared to rainy days in which more negative sentiments emerge and lenders become tighter with their credit.
Nonetheless, sunny weather only had a slight impact on the overall number of mortgage approvals, the study found. It says sunny sentiment boosted loan application approvals by around 0.80 percent from 1998 to 2010, the years covered by the data. On rainy and overcast days, mortgage approvals fell by 1.41 percent, the researchers found.
A rough estimate of the extra credit approved on one perfectly sunny day relative to one fully overcast day is about $150 million nationwide or $91,000 per county-day, the study noted. Sentiment has a stronger effect on the approvals of applications by low-income and medium-income households, which require more judgment. In contrast, the effect of sentiment disappears when the decision is clear-cut and when pre-approvals are common namely, for high-quality applications from households earning over $100,000 per year.
However, lenders need to be careful of giving away too much on sunny days. The study also found that there was a significantly higher ratio of defaults on loans that were approved on sunny days.