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Mortgage demand stalls as rates climb toward 7% on Fed moves

- Originally published at Inman News - Matt Carter

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Demand for purchase loans plateaued last week as mortgage rates continued to climb toward 7 percent, according to a weekly survey by the Mortgage Bankers Association.

The MBA survey showed applications for purchase loans were down a seasonally adjusted 0.4 percent last week when compared to the week before, and 29 percent from a year ago.

Requests to refinance were also down 11 percent week over week and 84 percent from a year ago.

With the recent jump in rates, adjustable-rate mortgage (ARM) loans accounted for 10 percent of applications, and close to one-fifth of loan requests by dollar volume.

“ARM loans remain a viable option for qualified borrowers in this rising rate environment,” MBA forecaster Joel Kan said in a statement.

Joel Kan

Kan said “aggressive policy measures” by the Federal Reserve to bring down inflation, along with ongoing uncertainty about the impact of the Fed’s efforts to trim its balance sheet, is “adding to the volatility in mortgage rates.”

Another factor pushing mortgage rates is that investors who fund most mortgages are demanding unusually high premiums in comparison to government bonds, out of fears the loans they make now could quickly be refinanced if rates drop. Investor wariness over heightened “prepayment risk” has widened the spread between 10-year Treasury yields and mortgage rates, Moody’s Chief Economist Mark Zandi recently noted.

For the week ending Sept. 23, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $647,200 or less), rates averaged 6.52 percent, up from 6.25 percent the week before. With points increasing to 1.15 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 6.01 percent, up from 5.79 percent the week before. With points increasing to 0.7 from 0.46 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.17 percent, up from 5.85 percent the week before. With points increasing to 1.31 from 1.15 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • Rates for 15-year fixed-rate mortgages popular with homeowners who are refinancing averaged 5.70 percent, up from 5.40 percent the week before. With points increasing to 1.33 from 1.06 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 5/1 ARMs, rates averaged 5.30 percent, up from 5.14 percent the week before. With points increasing to 1.28 from 0.99 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

Mortgage rates hit new 2022 highs

The Optimal Blue Mortgage Market Indices, which are updated daily, show rates for 30-year fixed-rate conforming mortgages have continued to surge past the 6 percent threshold this week, to new 2022 highs.
Rates for borrowers with credit scores below 680 making down payments of less than 20 percent have already climbed past 7 percent, according to Optimal Blue.

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Terms and conditions apply. Fees are subject to change and minimums/maximums apply. Buyer's agent fee remains at 3%. Sell for a 1% listing fee as long as you buy with Texas Ally within 365 days of the close date of your sale with Texas Ally. A 1.5% Listing fee will be charged upfront. The 0.5% difference will be applied at closing as a rebate when you buy with Texas Ally within 365 days. If you do not buy within that period with Texas Ally, the 0.5% will be forfeit. 

Terms and conditions apply. Fees are subject to change and minimums/maximums apply. Buyer's agent fee remains at 3%. Sell for a 1% listing fee as long as you buy with Texas Ally within 365 days of the close date of your sale with Texas Ally. A 1.5% Listing fee will be charged upfront. The 0.5% difference will be applied at closing as a rebate when you buy with Texas Ally within 365 days. If you do not buy within that period with Texas Ally, the 0.5% will be forfeit.  

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