Sunday, September 25, 2022

Mortgage demand flattens as rates make another run toward 6%

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There’s no sign of a rebound in purchase applications, but August data showing a strong job market “should support housing demand,” an MBA economist says.

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Homebuyer demand for mortgages was essentially flat last week as rates for 30-year fixed-rate loans continued to climb toward 6 percent.

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey shows demand for purchase loans fell by a seasonally adjusted 1 percent last week when compared to the week before and was down 23 percent from a year ago. Requests to refinance were down 1 percent week over week and 83 percent from a year ago.

Mike Fratantoni

“With the 30-year fixed rate rising to the highest level since mid-June, application volumes for both purchase and refinance loans dropped,” said MBA Chief Economist Mike Fratantoni in a statement. “Recent economic data will likely prevent any significant decline in mortgage rates in the near term, but the strong job market depicted in the August data should support housing demand. There is no sign of a rebound in purchase applications yet, but the robust job market and an increase in housing inventories should lead to an eventual increase in purchase activity.”

Requests to refinance accounted for 30.7 percent of total applications, up from 30.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 8.5 percent.

Volatile mortgage rates


The Optimal Blue Mortgage Market Indices show that after retreating from a 2022 peak of 6.06 percent registered on June 14, rates for 30-year fixed-rate conforming loans are once again flirting with 6 percent.

Rates moved higher last week as markets “continued to re-assess the prospects for the economy and the path of monetary policy, with expectations for short-term rates to move and stay higher for longer,” Fratantoni said.

Federal Reserve Chair Jerome Powell warned investors last month not to underestimate the Fed’s determination to fight inflation. The CME FedWatch Tool, which monitors futures contracts to calculate the probability of Fed rate hikes, shows traders this week pricing in a 76 percent chance of a 75-basis point hike in the short-term federal funds rate on Sept. 21.

For the week ending Sept. 2, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances $647,200 or less), rates averaged 5.94 percent, up from 5.80 percent the week before. With points increasing to 0.79 from 0.71 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 5.46 percent, up from 5.32 percent the week before. Although points decreased to 0.4 from 0.48 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 5.61 percent, up from 5.57 percent the week before. Although points decreased to 1.06 from 1.09 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
  • Rates for 15-year fixed-rate mortgages, popular with homeowners who are refinancing, averaged 5.23 percent, up from 5.10 percent the week before. With points increasing to 0.86 from 0.82 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 5/1 ARM loans, rates averaged 4.81 percent, up from 4.78 percent the week before. With points increasing to 0.88 from 0.61 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

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