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Loan applications slip to lowest level since 1995 as mortgage rates climb for the 7th week in a row, according to a weekly survey of lenders by the Mortgage Bankers Association
Demand for mortgages slipped to the lowest level since 1995 last week as mortgage rates climbed for the seventh week in a row, according to a weekly survey of lenders by the Mortgage Bankers Association.
After a slight pullback, rates were marching toward new highs Wednesday as bond market investors soured on 10-year Treasury notes that serve as a barometer for mortgage rates.
The MBA’s Weekly Mortgage Applications Survey showed applications for purchase loans were down by a seasonally adjusted 2 percent last week compared to the week before, and 22 percent from a year ago. While applications to refinance were up 2 percent week over week, they were down 8 percent from a year ago.
“Ten-year Treasury yields climbed higher last week, as global investors remained concerned about the prospect for higher-for-longer rates and burgeoning fiscal deficits,” MBA Deputy Chief Economist Joel Kan said, in a statement. “Mortgage rates followed Treasuries higher, with the 30-year fixed mortgage rate jumping 20 basis points to 7.9 percent — the highest since 2000.”
After retreating from 2023 highs, yields on 10-year Treasurys were on the rise again Wednesday, jumping more than 10 basis points to 4.95 percent. A lender survey by Mortgage News Daily showed rates on 30-year fixed-rate loans jumping by nearly the same amount Wednesday, to 7.98 percent, nearly erasing three previous days of consecutive declines.
Mortgage rates flirting with 8 percent
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The Optimal Blue Mortgage Market Indices, which track daily rate lock data but lag by a day, show rates on 30-year fixed-rate mortgages hitting a new high for the year of 7.81 percent on Oct. 19.
Although Federal Reserve policymakers aren’t expected to raise rates next week when they wrap up a two-day meeting on Wednesday, expectations that the Fed will pursue a “higher for longer” rate strategy have made investors of bonds and mortgage-backed securities that fund most home loans.
Other factors, including war in Ukraine and the Middle East, the potential for a government shutdown in November, rising U.S. borrowing, and the potential for the economy to tip into a recession next year also have investors demanding a larger “term premium” to compensate them for the risk posed by rate volatility, Federal Reserve Chair Jerome Powell noted last week.
But the recent runup in long-term bond yields could be helping the central bank cool the economy and curb inflation, allowing it to take a less hawkish stance on rates, Powell and some of his Fed colleagues have noted.
After implementing 11 rate increases since March 2022 that brought the short-term federal funds rate to a 22-year high of 5.25 percent to 5.5 percent, Fed policymakers haven’t raised rates since July.
The CME FedWatch Tool, which tracks futures markets to gauge the likelihood of future Fed moves, on Wednesday put the odds of a Fed rate hike next week at zero. While futures markets continue to price in a 25 percent chance of a small Fed rate hike in December, that’s down from 37 percent last week.
“The gradual upturn in the unemployment rate since the spring has passed largely unnoticed in markets, partly because it has been very modest but more because investors and the media are focused instead on the undeniably remarkable strength in payrolls,” economists at Pantheon Macroeconomics said in their Oct. 25 U.S. Economic Monitor. “Ultimately, though, the unemployment rate matters more to the Fed than the payroll numbers.”
Pantheon economists expect 10-year Treasury yields will fall to 4.25 percent by the end of the year and to 3.25 percent by the end of September 2024.
For the week ending Oct. 20, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 7.90 percent, up from 7.70 percent the week before. With points increasing to 0.77 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 $726,200) averaged 7.78 percent, up from 7.56 percent the week before. Although points decreased to 0.71 from 0.85 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
- For 30-year fixed-rate FHA mortgages, rates averaged 7.52 percent, up from 7.36 percent the week before. With points increasing to 1.15 from 1.02 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
- Rates for 15-year fixed-rate mortgages averaged 7.08 percent, up from 6.98 percent the week before. With points increasing to 1.42 from 1.04 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
- For 5/1 adjustable-rate mortgages (ARMs), rates averaged 6.99 percent, up from 6.52 percent the week before. Although points decreased to 0.68 from 1.50 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
- Applications for ARM loans accounted for 9.5 percent of all mortgage requests, the highest share since November 2022.
From MBA >>>
Mortgage applications decreased 1.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 20, 2023.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 8 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 22 percent lower than the same week one year ago.
“Ten-year Treasury yields climbed higher last week, as global investors remained concerned about the prospect for higher-for-longer rates and burgeoning fiscal deficits. Mortgage rates followed Treasuries higher, with the 30-year fixed mortgage rate jumping 20 basis points to 7.9 percent – the highest since 2000. Rates have now risen seven consecutive weeks at a cumulative amount of 69 basis points,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995. These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity. The ARM share of applications inched up to 9.5 percent, its highest since November 2022.”
The refinance share of mortgage activity increased to 31.4 percent of total applications from 30.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.5 percent of total applications.
The FHA share of total applications increased to 15.2 percent from 14.8 percent the week prior. The VA share of total applications decreased to 10.5 percent from 10.7 percent the week prior. The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.90 percent from 7.70 percent, with points increasing to 0.77 from 0.71 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 7.78 percent from 7.56 percent, with points decreasing to 0.71 from 0.85 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 7.52 percent from 7.36 percent, with points increasing to 1.15 from 1.02 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 7.08 percent from 6.98 percent, with points increasing to 1.42 from 1.04 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 6.99 percent from 6.52 percent, with points decreasing to 0.68 from 1.50 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.