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As mortgage rates dettle, will borrowers respond?
Mortgage rates eased at the end of October, but it remains to be seen whether lower rates will drive increased demand for mortgages.
That’s because most of the decline in rates tracked by the Mortgage Bankers Association’s Weekly Mortgage Applications Survey came at the tail end of the week.
So even though rates were down, requests for purchase loans were also down, by a seasonally adjusted 2 percent from the week before, and 9 percent from a year ago. Applications to refinance also fell by 4 percent from the week before, and 33 percent year-over-year.
“Mortgage rates decreased for the first time since August, as concerns about supply-chain bottlenecks, waning consumer confidence, weaker economic growth, and rising inflation pushed Treasury yields lower,” said MBA forecaster Joel Kan in a statement. “Most of the decline in rates came later in the week, which is likely why refinance applications declined to the lowest level since January 2020, and the overall share of activity fell to the lowest since July 2021.”
Kan said demand for purchase loans continues to be held back by high prices and low for-sale inventory, although the current level of demand still points to healthy demand for housing.
In its latest forecast, the MBA projected that purchase loan originations will total $1.59 billion this year, $1.72 billion in 2022, and $1.85 billion in 2023 — all of which would be records.
For the week ending Oct. 29, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $548,250 or less), rates averaged 3.24 percent, down from 3.30 percent the week before. With points remaining unchanged at 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased from last week.
- Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $548,250) averaged 3.29 percent, down from 3.34 percent. With points decreasing to 0.27 from 0.29, the effective rate also decreased from last week.
- For 30-year fixed-rate FHA mortgages, rates averaged 3.29 percent, down from 3.31 percent. With points remaining unchanged at 0.38, the effective rate also decreased from last week.
- Rates for 15-year fixed-rate mortgages averaged 2.58 percent, down from 2.59 percent the week before. With points decreasing to 0.29 from 0.33, the effective rate also rate decreased from last week.
In the long run, the MBA forecasts that mortgage rates will rise steadily next year, with rates on 30-year fixed-rate mortgages averaging 4 percent during the final three months of 2022.
Although other forecasters see rates rising more gradually, there’s general agreement that long-term interest rates will be under pressure as the Federal Reserve gradually withdraws the support it has provided to mortgage markets during the pandemic.
That’s because most of the decline in rates tracked by the Mortgage Bankers Association’s Weekly Mortgage Applications Survey came at the tail end of the week.
So even though rates were down, requests for purchase loans were also down, by a seasonally adjusted 2 percent from the week before, and 9 percent from a year ago. Applications to refinance also fell by 4 percent from the week before, and 33 percent year-over-year.
“Mortgage rates decreased for the first time since August, as concerns about supply-chain bottlenecks, waning consumer confidence, weaker economic growth, and rising inflation pushed Treasury yields lower,” said MBA forecaster Joel Kan in a statement. “Most of the decline in rates came later in the week, which is likely why refinance applications declined to the lowest level since January 2020, and the overall share of activity fell to the lowest since July 2021.”
Kan said demand for purchase loans continues to be held back by high prices and low for-sale inventory, although the current level of demand still points to healthy demand for housing.
In its latest forecast, the MBA projected that purchase loan originations will total $1.59 billion this year, $1.72 billion in 2022, and $1.85 billion in 2023 — all of which would be records.
For the week ending Oct. 29, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $548,250 or less), rates averaged 3.24 percent, down from 3.30 percent the week before. With points remaining unchanged at 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased from last week.
- Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $548,250) averaged 3.29 percent, down from 3.34 percent. With points decreasing to 0.27 from 0.29, the effective rate also decreased from last week.
- For 30-year fixed-rate FHA mortgages, rates averaged 3.29 percent, down from 3.31 percent. With points remaining unchanged at 0.38, the effective rate also decreased from last week.
- Rates for 15-year fixed-rate mortgages averaged 2.58 percent, down from 2.59 percent the week before. With points decreasing to 0.29 from 0.33, the effective rate also rate decreased from last week.
In the long run, the MBA forecasts that mortgage rates will rise steadily next year, with rates on 30-year fixed-rate mortgages averaging 4 percent during the final three months of 2022.
Although other forecasters see rates rising more gradually, there’s general agreement that long-term interest rates will be under pressure as the Federal Reserve gradually withdraws the support it has provided to mortgage markets during the pandemic.
