Mortgage Bankers Association

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The latest weekly survey data from Freddie Mac shows the 30-year fixed-rate mortgage jumped 40 basis points to an average of 6.70% this week, the highest level since 2007. 

The survey also indicates a large dispersion in rates, meaning that homebuyers can save hundreds of dollars by shopping around with different lenders.

A year ago at this time, rates averaged 3.01%. “The uncertainty and volatility in financial markets is heavily impacting mortgage rates,” said Sam Khater, Freddie Mac’s chief economist. The index compiles only purchase mortgage rates reported by lenders during the past three days.   

Inflation rose more than expected in August as rising shelter and food costs offset a drop in gas prices. Consequently, the Federal Reserve increased the federal funds rate by 75 basis points at its Federal Open Market Committee (FOMC) meeting in September. 

Another 125 basis points in hikes are still to come in 2022, with a federal funds rate topping out well above 4%.

Treasury yields show higher rates in the short term, signaling a recession on the horizon. The 2-year note, most closely tied to the Fed’s interest rate moves, increased five bps to 4.07% on Wednesday from the prior week. The 10-year note went from 3.51% to 3.72% in the same period.

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On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine measured the 30-year conforming mortgage rate at 6.643% on Wednesday, up from 6.124% the previous week. Meanwhile, the 30-year fixed-rate jumbo was at 6.294% Wednesday, up from 5.821% the week prior. 

An LO in the Miami, Florida area told HousingWire that on a $400,000 home purchase, with 5% down, a 700 FICO score, his clients are being quoted 7% for conventional loans and 6.125% on FHA and VA mortgages.

“This will be a time of changes,” he said. “Many LOs will leave the industry (especially the ones that only do refis and only sell interest rates), others will move probably from retail to wholesale. Lenders will close and some others will need to merge because of the new liquidity regulations that are coming in 2023.”

Pressure on demand

Pressure on rates has sharply reduced demand for mortgage loans, according to the Mortgage Bankers Association (MBA). 

The market composite index, a measure of mortgage loan application volume, declined 3.7% for the week ending Sep. 23. The refinance index had a 11% decline from the previous week, and the purchase index was marginally down 0.4%.

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 6.52%, up from last week’s 6.25%. Jumbo mortgage loans (greater than $647,200) increased to 6.01% from 5.79% in the same period.

“Our survey indicates that the range of weekly rate quotes for the 30-year fixed-rate mortgage has more than doubled over the last year,” Khater said. “This means that for the typical mortgage amount, a borrower who locked-in at the higher end of the range would pay several hundred dollars more than a borrower who locked-in at the lower end of the range.”  

To convince borrowers to take out a mortgage loan, some loan officers and lenders are highlighting how home prices are more affordable now than last year – and the ability of a borrower to refinance the loan when rates decline again. 

“There is more inventory relative to demand, and deals can be found. It’s transitioning to a buyers’ market, as 20% of sellers had a price reduction in August 2022, compared with 11% a year ago,” said Rich Weidel, CEO at Princeton Mortgage. “It’s now possible to buy a home for $400,000 that would have sold for $500,000 in 2021.” 

According to Weidel, if a prospective borrower bought that house in 2021 for $500,000 and put 20% down, the principal and interest, with rates at 3%, would be $1,686. Today, if the house could be bought at $400,000 and the interest rate was 7%, the payment would be $2,129. 

The homebuyer will pay more $5,316 per year due to the difference in rates, but would save $100,000 buying the house today compared to last year.

“Eventually, rates will come back down, and you can refinance the rate,” Weidell said. “If rates stay at 7%, it would take 18 years for the higher payment of $5,316 per year to chew up the $100,000 you saved buying the house.”

Still, home prices aren’t falling so dramatically in most markets. Not yet anyway. 

“Some buyers are giving low ball offers in the hope of having their offers accepted,” one mortgage broker/owner in Southern California told HousingWire. “Still the seller’s motivation is the key factor for whether to drop the price or not. The other issue is that many Realtors are still dreaming about having buyers fight over the properties and use that as a point of sale – but whether they succeed or not, that’s another question.”

James Kleimann contributed to this report.

Source: housingwire.com

Apache is functioning normally

You think things are bad in the housing market now? Stick around and see if mortgage rates climb into the 7% range.

If it happens, the current origination forecast of $2.2 trillion in 2023 will look awfully rosy. Even the most battle-tested industry players are preparing for one of the strongest housing market corrections in decades.

Federal Reserve Chairman Jerome Powell sent a clear message during a press conference following the announcement of the central bank’s decision to hike the federal funds rate by 75 basis points on Wednesday: the ongoing housing market correction, which brought the largest mortgage rates increase in four decades, is far from at an end.

Mortgage-backed securities are right about the worst place on the duration spectrum for this move. Freddie’s weekly survey is hopelessly low today – actual 30-year-fixed rates are well over 6.5% now.  

Matt Graham, CEO of MBS Live

“Builders are having a hard time finding lots, workers and materials,” Powell said. “For the longer term, what we need is supply and demand to get better aligned, so house prices go up at a more reasonable pace and people can afford houses. Probably, the housing market needs to go to a correction to get to that place.”

So far, the tightening monetary policy led the 30-year fixed mortgage rate to 6.29% this week, up 27 basis points from the previous week, the Freddie Mac’s Primary Mortgage Market Survey (PMMS) showed on Thursday. A year ago at this time, rates averaged 2.86%.

“The housing market continues to face headwinds as mortgage rates increase again this week, following the 10-year Treasury yield’s jump to its highest level since 2011,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Impacted by higher rates, house prices are softening, and home sales have decreased. However, the number of homes for sale remains well below normal levels.” 

Some market watchers were hoping to see Powell express some willingness to tone down the tightening. These observers were based solely on the expectation that existing policies will have the desired effect to bring inflation closer to the 2% target, according to Matt Graham, founder and CEO at MBS Live. 

“But the biggest takeaway for the mortgage industry is that Powell remained completely unflinching in his commitment to hike rates as much as it takes to tackle inflation,” Graham said. “Between yesterday afternoon and today, the entire financial market is in the throes of adjusting to that new reality. Mortgage-backed securities are right about the worst place on the duration spectrum for this move. Freddie’s weekly survey is hopelessly low today – actual 30-year-fixed rates are well over 6.5% now.” 

My guess is that traditional lenders will most likely be charging points to stay in the high 6s or pushing into the 7s now.

Blake Bianchi, CEO of Future Mortgage

Where did the ‘correction’ bring us?

Freddie Mac’s index compiles only purchase mortgage rates reported by lenders during the past three days. Other estimates, however, show that rates are even higher. 

The 30-year fixed mortgage rate was at 6.62% on Thursday afternoon, up 20 basis points compared to the previous day, Mortgage News Daily reported.

According to Bankrate.com, which surveys from the 10 largest banks, the primary mortgage rates are currently hovering around 6.4%. Rates are up over 300 basis points year-over-year, the largest trailing 12-month increase since the early 1980s, analysts from the investment banking firm Keefe, Bruyette & Woods wrote in a report on Wednesday. 

“This creates a very challenging environment for volume-sensitive businesses such as mortgage originators and title insurers,” the analysts said. “Given the magnitude of the move in rates, we think there could be a downside to current estimates for industry volumes in 2023.” 

Fannie Mae’s latest forecast, which was published this week, projects total mortgage origination activity at $2.44 trillion in 2022 and $2.17 trillion in 2023. 

Owners may be locked into their existing homes as mortgage rates rise, and the 3% rates from last year may not be back anytime soon.

Nadia Evangelou, an economist at NAR

With rates at this level, the entire mortgage market is 150-200 basis points (or more) out of the money to refinance, KBW analysts said. In addition, purchase activity has also declined materially in recent weeks. The Mortgage Bankers Association purchase index is currently 21% below 2021 levels and 26% below 2019 levels. 

To understand the impact on borrowers, this week’s increase in mortgage rates to 6.29% resulted in a monthly payment on a $400,000 loan of about $2,470, compared to $1,660 a year ago, according to Nadia Evangelou, National Association of Realtors senior economist & director of forecasting, said in a statement. 

“Owners may be locked into their existing homes as mortgage rates rise, and the 3% rates from last year may not be back anytime soon. While the nation suffers from a severe housing shortage, lower mobility can make housing inventory even tighter and cause home prices to continue escalating.”  

However, the median-priced home is worth about $80,000 more than in 2020 and $200,000 more than in 2012. “Thus, having positive equity in one’s home may ease the effects of rising mortgage rates on mobility.”

Where is the housing market heading? 

Looking ahead, loan officers have started to expect mortgage rates at the 7% level, a sign that the housing market correction will bring even greater affordability challenges in the year to come. 

A few years of 5-7% interest rates on mortgages are going to be good for the economy, great for buyers, as demand becomes less insane, and more sustainable long-term

Sean Grapevine, Branch Manager for UMortgage

“After the Fed raised rates yesterday, we now see the 10-year Treasury up today at 3.697%. My guess is that traditional lenders will most likely be charging points to stay in the high 6’s or pushing into the 7’s now,” said Blake Bianchi, founder and CEO at Boise-based brokerage Future Mortgage. “Mortgage brokers like us are most likely in the low-mid 6s on a primary residence.”

Bianchi said that in the current landscape, rate shopping has become more critical than ever, as saving half a percent or paying no points can financially impact buyers in this market. “The good news is that we see it is driving down prices, so buyers can get into a home for a better price and less competition and hopefully refinance later to improve their loan situation,” he said.

Sean Grapevine, a branch manager for UMortgage based in Atlanta, said Wednesday’s Fed decision pushed rates up by 50 to 75 basis points over the last couple of weeks, which is not entirely bad for the housing market. 

“Rising rates from the Fed do cause some temporary pain as people adjust to the differences, but a few years of 5-7% interest rates on mortgages are going to be good for the economy, great for buyers, as demand becomes less insane, and more sustainable long-term,” he said. 

Source: housingwire.com

Apache is functioning normally

It’s a tale of two rates today. The first is the federal funds target rate, which is the rate the Federal Reserve and Jay Powell set. That rate has been on a steady climb since March and is now between 3.75% and 4%. All signs point to the Fed raising that rate again next week to cool inflation.

The second rate is the average interest rate on a 30-year fixed-rate mortgage, which typically moves in tandem with what the Fed is doing. The key word there is “typically,” because over the last month, that rate has dropped from 7.16% to 6.4%, according to the Mortgage Bankers Association.

So, what gives?

If the Fed raises interest rates, what mortgage rates will do kind of depends.

“It depends on what the market outlook for the future of the economy at large is,” said Karan Kaul, who researches housing finance at the Urban Institute.

The “market” he’s talking about isn’t the market for buying and selling houses — it’s the market for buying and selling mortgages.  

“Most mortgages made in the U.S. end up being bundled and securitized into investment products, bonds that are eventually sold to investors across the world,” he said.

When last month’s inflation numbers came in better than expected, hedge funds, bond funds and banks across the world said, “Huh, maybe the Fed will slow down its rate hikes now.” So they bought a bunch of mortgages while rates were still pretty high, thinking, “Let’s get in while homebuyers are still paying that sweet 7%.”

But when there’s a big surge in investor demand for mortgage bonds, “the price goes up, the rate goes down, and that trickles through to what the homeowners will see,” said Jeana Curro at Bank of America.

And all of a sudden that sweet 7% drops.  

If the mere mention of mortgage-backed securities is giving you Great Recession vibes, Curro said this time really should be different. “Now, lending standards have really, really tightened.”

It’s an open question whether there’ll enough investor demand to keep mortgage rates down — especially because one big buyer is out of the market entirely. 

“The Fed has been the largest and really the only buyer of securities the past two years or so,” said Joel Kan, an economist with the Mortgage Bankers Association.  

The Fed originally boosted its mortgage buying program after the pandemic hit. It stopped this year, trying to bring down inflation — including home prices.

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Mortgage demand continues to decline amid surging home loan rates, according to the latest survey from the Mortgage Bankers Association (MBA). 

The mortgage composite index for the week ending Oct. 7 fell 2% from the prior week and 68.7% compared to the same period in 2021, on an adjusted basis, the survey shows. 

The refinance index decreased 1.8% from the previous week and was 86% lower than the same week one year ago. Meanwhile, the seasonally adjusted purchase index declined 2.1% from one week earlier and was down 39% from this time last year.

“The news that job growth and wage growth continued in September is positive for the housing market, as higher incomes support housing demand,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement. “However, it also pushed off the possibility of any near-term pivot from the Federal Reserve on its plans for additional rate hikes.”

The Fed has increased the federal funds rate by 300 basis points so far this year to control surging inflation, resulting in a “reset” of the mortgage market. Another 125 basis points in hikes are still expected to come in 2022, with a federal funds rate topping out well above 4%.  

Reflecting the tightening monetary policy, “Mortgage rates moved higher once again during the first week of the fourth quarter of 2022, with the 30-year conforming rate reaching 6.81%, the highest level since 2006,” Fratantoni said. Rates were at 6.75% the previous week. 

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Lenders continue to face tightening profit margins as mortgage rates stay substantially higher than they were last year. In light of this, HousingWire recently caught up with Teraverde’s Rob Peterson to learn more about what lenders need to succeed in today’s lending environment.

Presented by: Teraverde

According to the MBA survey, the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $647,200) increased to 6.25% last week from the prior week’s 6.14%. The average contract interest rate for 5/1 ARMs increased to 5.56% from 5.36% in the same period. 

“Mortgage rates increased across all product types in MBA’s survey, with the largest, a 20-basis-point increase, for 5-year ARM loans. The ARM share of applications remained quite high at 11.7% – just below last week’s level,” Fratantoni said.  

According to Mortgage News Daily, the 30-year fixed rate mortgage on Tuesday was 7.14% on average. 

The steep increase in rates has all but wiped-out demand for refinancing, with its share of mortgage activity remaining unchanged at 29% of total applications last week from 30.2% two weeks prior. 

The FHA share of total applications increased to 13.5% from 13.2% the week prior. The VA share rose from 10.7% to 10.9%. Meanwhile, the USDA share slightly decreased to 0.5% from 0.6% in the same period. 

Source: housingwire.com

Apache is functioning normally

Demand for mortgage loans dropped following the Fed’s decision to raise interest rates by an additional 75 basis points last week.

The market composite index, a measure of mortgage loan application volume, declined 3.7% for the week ending September 23, compared to the previous week. It was also down 66% compared to the same week in 2021. 

The refinance index fell 11% from the previous week and was down 84% from the same week in 2021. The purchase index decreased 0.4% from the previous week and dropped 29% from a year ago. 

“Applications for both purchase and refinances declined last week as mortgage rates continued to increase to multi-year highs following more aggressive policy measures from the Federal Reserve to bring down inflation,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Kan added the ongoing uncertainty about the impact of the Fed’s reduction of its mortgage backed securities and Treasury holdings is adding to the volatility in mortgage rates. 

Following the Fed’s decision to raise the federal funds rate by another 75 bps, to 3%-3.25%, bringing it back to a level last seen in March 2008, mortgage rates past the 7%-level as of September 27, according to Mortgage News Daily.

How lenders can improve business models in 2022

As 2022 proves to be a challenging year for the housing market, lenders are looking to take advantage of market downtime by improving their internal processes. HousingWire recently spoke with James Deitch, CEO of Teraverde, about the changes lenders can make to their business models in order to remain profitable.

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With the 30-year fixed-rate mortgage rates more than doubling since January, the pace of refinancing is running at a 22-year low, according to Kan. 

The MBA data shows the refinance share of all mortgage activity decreased to 30.2% of total applications this week from the previous week’s 32.5%. 

What’s noteworthy is the increase in the share of adjustable-rate mortgages (ARM) applications to 10.4% of the total demand, Kan said. With the recent jump in rates, the ARM share of applications reached about 20% of dollar volume. “ARM loans remain a viable option for qualified borrowers in the rising rate environment,” Kan added.

The Federal Housing Administration’s (FHA) share of total applications fell to 12.5% from the previous week’s 13.3%. The Veterans Affairs’s (VA) share of applications decreased to 10.7%, from 10.9%, and the United States Department of Agriculture’s (USDA) share remained unchanged at 0.6% from the previous week.

MBA’s estimate indicated the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 6.52%, from the previous week’s 6.25%. Jumbo mortgage loans (greater than $647,200) increased to 6.01% from 5.79% in the same period.

The survey, conducted weekly since 1990, covers 75% of all U.S. retail, residential mortgage applications.

Source: housingwire.com

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IP Galanternik D.U./Getty Images

As economic clouds loom, mortgage lenders are making it harder for some borrowers to get some types of home loans. Along with that not-so-great news, however, comes a silver lining: There’s still plenty of opportunity for borrowers to qualify for mortgages.

Why mortgage lenders are extending less credit

Mortgage credit availability declined in April to its lowest level since January 2013, according to the Mortgage Bankers Association (MBA).

“The contraction was driven by reduced demand for loan programs such as certain adjustable-rate [mortgage] loans, cash-out and streamline refinances and those with lower credit score requirements,” says Joel Kan, MBA deputy chief economist.

Back in 2013, the U.S. housing market was emerging from the Great Recession, and lenders were still wary of handing out too many loans. They gradually loosened standards in the years that followed, then tightened up at the beginning of the pandemic. Notably, MBA’s index shows credit availability is even tighter now than it was during the uncertain time at the beginning of the pandemic.

There are a few reasons lenders have become less eager to extend credit:

  • The banking sector has hit a rough patch. Three of the largest bank failures in U.S. history took place this spring — Silicon Valley Bank and Signature Bank in March and First Republic Bank in May. None of the three were major players in the mortgage industry, but the headline-grabbing turmoil roiled lending markets all the same.
  • The economic outlook is uncertain. Hoping to cool inflation, the Federal Reserve has raised interest rates at 10 consecutive meetings. While the labor market’s still cruising along — employment growth surpassed expectations in April — the Fed’s tightening will eventually result in a slowdown. That typically means an increase in unemployment rates, and more defaults by borrowers, giving lenders reason to exercise caution.
  • The boom went bust. As mortgage rates plunged to all-time lows during the pandemic, Americans rushed to refinance and buy homes. When rates started rising in 2022, that activity slowed — and lenders that were hiring during the boom turned to layoffs during the bust. As a result, lenders now have less capacity to handle loan applications than before.

Niche loans are most affected

While this all sounds like a problem for mortgage borrowers, it’s possible many might not even notice the pullback.

An April survey by the Federal Reserve found the stricter standards don’t affect conventional conforming loans bought by Fannie Mae and Freddie Mac — the majority of mortgages originated in the U.S. —  or loans issued through the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) programs.

Instead, lenders are holding back on niche products such as subprime mortgages, home equity lines of credit (HELOCs) and non-qualified, or “non-QM” jumbo mortgages.

What tighter mortgage credit means for you

Rest assured, you still can qualify for a mortgage if you meet the lender’s credit and other approval criteria, including having sufficient employment history and income.

If you’re looking for a loan type affected by tighter availability, however, there are a few ways to boost your chances of getting what you need:

  • Boost that credit score as high as you can. “People with lower credit scores are having a harder time today,” says Melissa Cohn, regional vice president of William Raveis Mortgage in Delray Beach, Florida. Your credit score remains the single most important factor in determining your mortgage rate. While 740 used to be the goal to strive for, new rules from Fannie Mae and Freddie Mac have made 780 the threshold at which borrowers get the best rates. You can still get a mortgage with a credit score in the 600s, but it’ll cost you more — or might be harder to find altogether.
  • Make as much of a down payment as possible. More cash down translates to a lower loan-to-value (LTV) ratio — and a lower LTV means more lenders willing to extend you credit. You can still qualify with 3 percent down for a conventional loan or 3.5 percent down for an FHA loan, but you’ll pay higher fees, and mortgage insurance, to compensate for your lower upfront investment.
  • Don’t stretch your budget too far. If the loan you want means your mortgage payment would eat up a significant chunk of your monthly budget, a lender might reject your application, even if all your other financials check out. That’s not to say you absolutely won’t qualify — but you’ll help your case by keeping the mortgage payment in the range of 30 percent of your income. Keep in mind, too: If you want an adjustable-rate loan, many lenders only qualify borrowers based on a higher payment, rather than the initial low payment.
  • Build up your cash reserves well in advance. Lenders are getting stricter about the sources of your down payment and cash reserves. If you expect to use a gift from family to buy a home, put the money in the bank now, says Cohn. That “seasoning” time will make your loans look better to lenders.

Source: bankrate.com

Apache is functioning normally

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Mortgage rates, now around 6.5%, are cooling down the housing market and triggering mass layoffs in the mortgage and real estate industries.

Mortgage rates have nearly doubled to around 6.5% from the beginning of this year, but they may have not peaked, putting pressure on affordability for most prospective buyers as the Federal Reserve vows to tame inflation. 

Following the Fed’s decision to raise interest rates by an additional 75 basis points on Wednesday, the central bank said it will hike rates as high as 4.6% in 2023. Goldman Sachs predicts a 75 bps hike at the November meeting followed by a 50 bps raise in December and a 25 bps increase in January 2023. 

Interest rates can move higher as the economy stays firm, Logan Mohtashami, Lead Analyst at HousingWire said. “However, this is all about a tug of war between how long the economy can still be expanding.”

The Fed’s short-term rate does not directly impact long-term mortgage rates but it does steer market activity to create higher rates and reduce demand. Time will tell whether the mortgage market had already priced in expectation of the Fed’s rate hike on Wednesday, but in the months ahead, many industry watchers forecast mortgage rates to continue their climb until the central bank changes its monetary policy. 

“Before the Federal Reserve raised the federal funds rate by 0.75 percentage point this week, mortgage rates had already risen by a similar amount,” said Holden Lewis, home and mortgage expert at NerdWallet. “Now the Fed has signaled that it will hike rates several more times this year and next year, so mortgage rates have plenty of room to go up even more.”

We do not see new construction returning in a meaningful way any time soon. Our macro-outlook is that demand for housing will remain out of balance with supply for the mid to long term.

Kurt Carlton, President of New Western

“The trickle-down effect of rising borrowing costs means that homebuyers will continue to feel higher monthly payments,” added George Ratiu, manager of economics research at Realtor.com.

With the rate for a 30-year mortgage 300 basis points higher than in 2021, the buyer of a median-priced home this week is facing a monthly payment that is 66% higher than the same week in 2021, Ratiu noted. 

Marty Green, principal with mortgage law firm Polunsky Beitel Green, described increasing affordability pressures in the housing market as “throwing cold water on what was a frenzied residential real estate market.”

“Where ‘inventory’ was the big concern in 2021 and early 2022, the concern today is ‘affordability,’ with the combination of substantial price increases and rising rates simply pricing more and more Americans out of the market,” Green said. 

The number of existing home sales reflects how the housing sector has been impacted by the Fed’s interest rate policies. Existing home sales declined for seven consecutive months in August, declining 0.4% to a seasonally adjusted annual rate of 4.8 million units last month from July, according to the National Association of Realtors (NAR). Existing home sales are down 19.9% year-over-year. 

They (buyers with less financial stability) are having to go to surrounding towns instead of where everybody wants to be because they can no longer afford the more desirable locations.

Will Savage, an LO at PMC Mortgage

Although home price growth slowed and demand has weakened, tight supply is keeping prices elevated. The median existing house price increased 7.7% from a year earlier to $389,500 in August. While housing prices typically slow in July and August, they surged to an all-time-high of $413,800 in June.

With the mortgage industry accepting the current rate environment as a “necessary period of adjustment,” lenders are expected to roll out “creative mortgage products” to entice more borrowers, said Kurt Carlton, co-founder and president of real estate investment firm New Western. 

“We do not see new construction returning in a meaningful way any time soon. Our macro-outlook is that demand for housing will remain out of balance with supply for the mid to long term,” Carlton said.

According to the NAR, there were 1.28 million existing homes on the market in August and would take 3.2 months to exhaust the current inventory of existing homes at last month’s sales pace. A five-to-seven-month supply is viewed as a healthy balance between supply and demand. 

Loan officers get an up-close look at how much shoppers and capital-strapped buyers are getting priced out in the rate-rising environment.

Will Savage, a loan originator at PMC Mortgage, sees many pre-approved clients having to get reapproved for a mortgage based on the rate increases. 

With higher monthly mortgage payments, buyers who had money are getting spooked and some those with less financial stability are getting priced out, Savage explained. 

“They (buyers with less financial stability) are having to go to surrounding towns instead of where everybody wants to be because they can no longer afford the more desirable locations.” 

And for those shoppers who choose to buy, “they may be more likely to select an adjustable-rate mortgage (ARM) because their initial payments will be lower than those they would find with a fixed rate mortgage,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. 

Buyers are going to have more choices than they’ve had in the last couple of years.

Matt Topping, an LO at Movement Mortgage

The way ARMs work is lenders offer lower mortgage rates for the initial term, generally three, five, or seven years. After that initial period ends, rates adjust periodically based on a benchmark or index, such as the Secured Overnight Financing Rate (SOFR), based on actual transactions in the Treasury repurchase market. 

About 9.1% of total mortgage applications were for ARMs for the week ending Sep. 16, according to the Mortgage Bankers Association (MBA). The volume is slightly lower than in May when it hit a 14-year high of nearly 11% of the overall residential mortgage applications.

While some housing market watchers, including Ratiu, expect that household finances will get squeezed by rising costs and a shortage of homes for sale, some hopeful loan officers see opportunities for buyers as they may be seeing price cuts. 

“We are already starting to have sellers realize we had a great run for a couple years and we’re getting more inventory,” said Matt Topping, a senior loan officer at Movement Mortgage.

“Buyers are going to have more choices than they’ve had in the last couple of years. They’re also going to have less competition and I think they’re going to be sellers who are more amenable to things they may have not even considered six months ago, a year ago.”

Source: housingwire.com

Apache is functioning normally

Mortgage interest rates sunk on all loan terms from a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans all dropped.

The Federal Reserve has lifted rates 10 times in a row, most recently at its May 3 meeting. Rates now are at a 15-year high, but the consensus is that inflation is finally cooling and the central bank might halt raising rates.

”Mortgage rates have settled into a new normal of around 6.5 percent on a 30-year fixed-rate loan,” says Lisa Sturtevant, chief economist at Bright MLS, a large multiple listing service in the Middle Atlantic region. ”With growing recession risks, we could see mortgage rates dip lower, but we will not be returning to the 3 percent level seen during the height of the pandemic.”

Rates as of May 9, 2023.

These rates are marketplace averages based on the assumptions indicated here. Actual rates displayed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Tuesday, May 9th, 2023 at 7:30 a.m.

>>See historical mortgage rate trends, from the 70s to today

You can save thousands of dollars over the life of your mortgage by getting at least three rate quotes. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates

Today’s 30-year mortgage rate dips, -0.01%

The average rate for a 30-year fixed mortgage is 6.87 percent, down 1 basis point over the last week. This time a month ago, the average rate on a 30-year fixed mortgage was unchanged, at 6.87 percent.

At the current average rate, you’ll pay principal and interest of $656.59 for every $100k you borrow. That’s $0.67 lower, compared with last week.

How do I view personalized 30-year mortgage rates?

Use the loan widgets on this page or head to our primary rates page to see what kind of rates are available in your situation. You just need to give us a little information about your finances and where you live. With that data, Bankrate can show you real-time estimates of mortgages available to you from a number of providers.

15-year mortgage falls,-0.03%

The average rate for the benchmark 15-year fixed mortgage is 6.23 percent, down 3 basis points over the last seven days.

Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $856 per $100k borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM rate eases, -0.01%

The average rate on a 5/1 adjustable rate mortgage is 5.79 percent, sliding 1 basis point since the same time last week.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 5.79 percent would cost about $586 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Current jumbo mortgage rate moves lower, -0.02%

The average jumbo mortgage rate today is 6.94 percent, a decrease of 2 basis points over the last seven days. This time a month ago, the average rate on a jumbo mortgage was unchanged, at 6.94 percent.

At the average rate today for a jumbo loan, you’ll pay $661.28 per month in principal and interest for every $100,000 you borrow. That’s a decline of $1.34 from last week.

Summary: How interest rates have shifted over the past week

  • 30-year fixed mortgage rate: 6.87%, down from 6.88% last week, -0.01
  • 15-year fixed mortgage rate: 6.23%, down from 6.26% last week, -0.03
  • 5/1 ARM mortgage rate: 5.79%, down from 5.80% last week, -0.01
  • Jumbo mortgage rate: 6.94%, down from 6.96% last week, -0.02

Interested in refinancing? See rates for home refinance

Today’s 30-year mortgage refinance rate goes up, +0.02%

The average 30-year fixed-refinance rate is 7.01 percent, up 2 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was lower, at 6.97 percent.

At the current average rate, you’ll pay $665.97 per month in principal and interest for every $100,000 you borrow. That’s an increase of $1.34 over what you would have paid last week.

Where are mortgage rates headed?

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing different mortgage terms

The 30-year fixed mortgage is the most popular loan for homeowners. This type of loan has a number of advantages, including:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

Are mortgage rates going up?

Throughout 2021, mortgage rates are expected to begin rising again. The National Association of Realtors expects rates to average 3.1% and the Mortgage Bankers Association (MBA) says mortgage rates will average 3.3% in 2021. These rate estimates are both up from the 3.0% mortgage rate average in 2020 but lower than 2019’s average rates. Many experts say it could be years before mortgage rates return to their pre-pandemic levels.

Sources:

  • National Association of Real Estate Editors
  • Freddie Mac Federal Home Loan Mortgage Corporation

What comes next:

Featured lenders for today, May 9, 2023

Source: bankrate.com

Apache is functioning normally

Mortgage rates tumbled downward by nearly 1% last week on the heels of a lackluster jobs report, which helped to spur renewed interest in mortgage loans by potential homebuyers. The uptick in mortgage applications was a welcome change for the struggling housing market, which has been plagued by affordability issues that have kept many would-be buyers on the sidelines.

Overall, mortgage applications increased last week by 5.3% on a seasonally adjusted basis compared to one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The survey, which has been conducted weekly since 1990, covers over 75% of all U.S. retail residential mortgage applications. 

Purchase applications accounted for the majority of the uptick last week, with a seasonally adjusted increase of 8% compared to the week prior.

“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30% – the lowest level in two months,” said Mike Fratantoni, MBA’s SVP and chief economist. “Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8%.”

There was increased demand for government loans in particular, with the Federal Housing Administration (FHA) share of total purchase applications increasing to 12.3% from 12% the week prior. The share of Department of Veterans Affairs (VA) purchase loans also saw an uptick, climbing to 12.8% from 11% week over week.

The U.S. Department of Agriculture’s (USDA) share of total applications saw a slight downturn, however, decreasing to 0.5% from 0.6% the week prior.

Refi app volume a “mixed bag”

On the other hand, refinancing application volume was a “mixed bag” last week, according to the MBA. While total refi app volume was relatively flat, conventional volume declined last week — and the VA refi volume increased.

In addition, the adjustable-rate mortgage (ARM) share of activity decreased to 6% of total applications.

“Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing,” Fratantoni said. “The level of refinance activity remains almost 60 percent below last year, as most homeowners are currently locked in at much lower rates,” Fratantoni said.

This trend has been an ongoing issue for the housing market, as homeowners are hesitant to sell their homes and give up their current 2-3% interest rates. In turn, housing inventory has dwindled month after month — furthering affordability issues and causing the spring buying season to miss its expected burst.

The MBA shows the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.3% from 6.4% last week. Rates on jumbo loan balances (greater than $726,200) decreased to 6.26% from 6.36% on a weekly basis.

Source: housingwire.com