Mortgage volumes decline after interest rate hikes

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The Mortgage Bankers Association Composite Market Index, a measure of mortgage lending volume based on a survey of association members, declined 1.1% on a seasonally adjusted basis for the weekly period ending 24 September, while the unadjusted index fell 1% from A week ago. Compared to the same period in 2020, the seasonally adjusted application volume was 4.5% lower.

“The rate hike – mostly later in the week – has led to a decrease in purchase and refinancing requests, with a significant drop in government loan requests,” said Joel Kan, associate vice president of economic forecasting and industrial MBA, in a press release.

The seasonally adjusted purchasing index edged down 1%, while on an unadjusted basis, purchases fell 2% week over week. The seasonally adjusted index was 12% below levels for the same period last year. The refinancing index also slipped 1% from the previous week, but activity was up 0.4% from a year ago.

The decline in government-sponsored applications signaled a trend reversal a few weeks earlier. Loans sponsored by the Federal Housing Administration accounted for 10.4% of volume, up from 11.5% the week before. The share of mortgages guaranteed by Veterans Affairs fell to 10.2% of all applications from 10.4% the week before, while the percentage of loans guaranteed by the US Department of Agriculture fell from 0 , 5% to 0.4%.

Conventional loans, however, thwarted the decline in federal demands and recorded a slight increase, particularly for refinancing. “Maybe it was a sign that some borrowers reacted to higher rates and decided to refinance,” Kan said.

Refinances ended up with a slightly larger share – 66.4% – of the total volume of mortgage loans compared to the 66.2% recorded in the last weekly period. The percentage of adjustable rate mortgage applications also increased to 3.4% of total activity, from 3.3%.

With higher conventional lending activity, the average mortgage size jumped over 3% overall from the previous week. The buying average hit its highest level since May. “With home price appreciation continuing to rise, increasing by more than 19% per year in July, larger loan applications continue to outpace lower balance loans,” Kan said.

The average purchase requisition size was $ 410,300, an increase of 3.5% from $ 396,300 the previous week, while the average refinance loan amount climbed 3.4 % at $ 311,200 compared to $ 301,000. The overall average volume size for the week was $ 344,500, also 3.4% higher than the $ 333,200 reported seven days earlier.

News from the Federal Reserve led to the week’s rate move, according to Kan. “Heightened optimism about the strength of the economy pushed Treasury yields higher after last week’s FOMC meeting,” he said. “In response, mortgage rates have increased for all types of loans. “

  • After holding steady at 3.03% for four weeks, the average contractual interest rate for 30-year fixed-rate mortgages with compliant loan balances of $ 548,250 increased seven basis points to 3 , 1%.
  • The average contractual interest rate on 30-year fixed-rate jumbo loans with balances above $ 548,250 rose to 3.14%, from 3.11% a week earlier.
  • The average contractual interest rate on 30-year FHA-guaranteed mortgages increased by two basis points, reaching 3.09% from 3.07% the previous week.
  • The 15-year mortgage average climbed to 2.43% from 2.34% a week earlier.
  • The contractual interest rate on 5/1 variable rate mortgages jumped 26 basis points week over week, from 2.51% to 2.77%.

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