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Homebuyers’ demand for mortgages eased last week as mortgage rates rose to the highest levels seen in 20 years. That trend continues this week, despite the looming threat of a government shutdown.
Purchase loan applications fell a seasonally adjusted 2% last week from the previous week, the first decline since the week ending Sept. 1, according to the Mortgage Bankers Association’s weekly survey of financial institutions. became. Looking back over the past year, applications for purchase loans have decreased. 27 percent.
Fed policymakers voted last week to hold off on raising short-term interest rates, but one more hike will be needed to rein in inflation, and the rate hikes could last longer than previously expected. announced that there is a possibility that
MBA Deputy Chief Economist Joel Kang said the Fed’s “long-term interest rate policy has caused long-term Treasury yields to rise, and mortgage rates have followed suit.”
“As U.S. Treasury yields rose late last week, mortgage interest rates rose to their highest levels in more than 20 years,” Prime Minister Suga said in a statement. “The 30-year fixed mortgage rate rose to 7.41%, the highest rate since December 2000, and the 30-year fixed jumbo mortgage rate rose to 7.34%.” This is the highest since its inception.
Kang said that both prospective homebuyers and homeowners continue to feel the impact of rising interest rates, with many homeowners having little incentive to refinance, with refinance applications down 21% year over year. Stated.
Mortgage interest rates are slowly rising
of Optimal Blue Mortgage Market Indexshows that interest rates on 30-year fixed rate conforming loans launched in 2017 hit a record high of 7.38% on Tuesday.
Freddie Mac’s interest rate research, which dates back to 1971, shows interest rates reached a 2023 high of 7.23% in the week ending Aug. 24. Highest level since June 2001it is likely to exceed this level on September 28th, when the next survey is released.
While Fed policymakers are looking for signs that inflation is easing, forecasters at Pantheon Macroeconomics say there are several events beyond the Fed’s control that could hurt growth. Pointed out. United Auto Workers strike Three major U.S. automakers are being targeted, and federal student loan payments will resume in October, raising the possibility of a government shutdown.
House Speaker Kevin McCarthy has not yet reached the number of votes needed to pass a short-term spending bill on Wednesday, and a government shutdown this weekend appears “inevitable.” politiko report.
“Stock markets are reacting as badly to the prospect of a government shutdown as they did in December 2018,” Pantheon forecasters noted Tuesday in the latest report from U.S. Economic Monitor. “The market is probably right to be nervous about the potential impact of extending the shutdown, but like us, the market is concerned that the Fed has gone too far in raising rates.”
10-year US Treasury yield rises to new high in 2023
futures market tracked by CME FedWatch Tools We estimate there is a 42% chance that the Fed will raise rates at least once this year, and only a 5% chance that the Fed will bring rates back below current levels by March, before the spring home buying season begins.
For the week ending September 22, MBA reported average interest rates for the following types of loans:
- For 30 years fixed interest rate Compatible mortgage (Loan balances $726,200 or less) Interest rates averaged 7.41 percent, up from 7.31 percent the previous week. For loans with an 80% loan-to-value ratio (LTV), the points decreased from 0.72 (including origination fees) to 0.71, but the effective interest rate also increased.
- 30 year fixed rate interest rate jumbo mortgage (loan balances of $726,200 or more) averaged 7.34%, up from 7.32% the previous week. The points for an 80% LTV loan decreased from 0.80 (including origination fee) to 0.78, but the effective interest rate also increased.
- For 30 years fixed interest rate FHA home loanInterest rates averaged 7.16%, up from 7.08% the previous week and the highest level since March 2002. The effective interest rate also increased as the points for 80% LTV loans increased from 0.92 (including origination fees) to 0.96.
- Fee 15 year fixed rate home loan, Popular loans for homeowners refinancing averaged 6.73%, up from 6.62% the previous week and the highest level since July 2001. Points for 80% LTV loans (including origination fees) increased from 1.08 to 1.17, and the effective interest rate also increased.
- In case of 5/1 variable rate mortgage (ARMs), interest rates averaged 6.47%, up from 6.42% the previous week. LTV 80% loan points increased from 1.10 to 1.58 (including origination fees), and the effective interest rate also increased.
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Email Matt Carter