Rates Jump Up and Applications Drop Down
On Thursday, June 1, 2023, Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.79 percent, up from last week when it averaged 6.57 percent. A year ago at this time, the 30-year FRM averaged 5.09 percent.
The 15-year fixed-rate mortgage averaged 6.18 percent, up from last week when it averaged 5.97 percent. A year ago at this time, the 15-year FRM averaged 4.32 percent.
“Mortgage rates jumped this week, as a buoyant economy has prompted the market to price-in the likelihood of another Federal Reserve rate hike,” said Sam Khater, Freddie Mac’s Chief Economist. “Although there has been a steady flow of purchase demand around rates in the low to mid six percent range, that demand is likely to weaken as rates approach seven percent.”
According to the Mortgage Bankers Association (MBA), mortgage applications decreased 3.7 percent from one week earlier. The Refinance Index decreased 7 percent from the previous week and was 45 percent lower than the same week one year ago. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 31 percent lower than the same week one year ago.
“Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon. Mortgage rates for conforming, balance 30-year loans were being quoted above 7 percent by some lenders last week, and the weekly average at 6.9 percent reached the highest level since last November,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Application volumes for both purchase and refinance loans decreased last week due to these higher rates. While refinance demand is almost entirely driven by the level of rates, purchase volume continues to be constrained by the lack of homes on the market.”
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According to MBA’s Commercial/Multifamily Delinquency Report, commercial and multifamily mortgage delinquencies increased in the first quarter of 2023.
“Ongoing stress caused by higher interest rates, uncertainty around property values, and questions about fundamentals in some property markets are beginning to show up in commercial mortgage delinquency rates,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Delinquency rates increased for every major capital source during the first quarter, foreshadowing additional strains that are likely to work their way through the system.”
Freddie Mac wants to remind homeowners and mortgage servicers of its immediate relief options for those affected by Typhoon Mawa in Gwam. This includes mortgage relief for up to 12 months without incurring late fees or penalties.
Additional mortgage activity
- The refinance share of mortgage activity decreased to 26.7 percent of total applications from 27.4 percent the previous week.
- The adjustable-rate mortgage (ARM) share of activity increased to 6.8 percent of total applications.
- The FHA share of total applications increased to 12.7 percent from 12.5 percent the week prior.
- The VA share of total applications decreased to 12.1 percent from 12.5 percent the week prior.
- The USDA share of total applications remained unchanged at 0.5 percent from the week prior.
This week in mortgage rates
Rates increase again. Here’s how average fixed rates broke down:
- 30-year fixed-rate loans: 6.79% (up from 6.57%)
- 15-year fixed-rate loans: 6.18% (up from 5.97%)
Check back next week for the most up-to-date mortgage and housing news.
May 25 – Rates Rise Again and Applications Fall
On Thursday, May 25, 2023, Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.57 percent, up from last week when it averaged 6.39 percent. A year ago at this time, the 30-year FRM averaged 5.10 percent.
The 15-year fixed-rate mortgage averaged 5.97 percent, up from last week when it averaged 5.75 percent. A year ago at this time, the 15-year FRM averaged 4.31 percent.
“The U.S. economy is showing continued resilience which, combined with debt ceiling concerns, led to higher mortgage rates this week,” said Sam Khater, Freddie Mac’s Chief Economist. “Dampened affordability remains an issue for interested homebuyers, and homeowners seem unwilling to lose their low rate and put their home on the market. If this predicament continues to limit supply, it could open up an opportunity for builders to help address the country’s housing shortage.”
According to the Mortgage Bankers Association (MBA), mortgage applications decreased 4.6 percent from one week earlier. The Refinance Index decreased 5 percent from the previous week and was 44 percent lower than the same week one year ago. The unadjusted Purchase Index decreased 5 percent compared with the previous week and was 30 percent lower than the same week one year ago.
“Mortgage applications declined almost five percent last week as borrowers remained sensitive to higher rates. The 30-year fixed-rate increased to 6.69 percent, the highest level since March,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications. Refinance activity remains limited, with the refinance index falling to its lowest level in two months and more than 40 percent below last year’s pace.”
Added Kan, “Investors remained attuned to the uncertainty around the U.S. debt ceiling and communication from several Federal Reserve officials last week, which sent Treasury yields higher, along with mortgage rates. Economic data released over the past week have also pointed to a still-resilient economy. The housing market received positive data on new residential construction — which is seen as a key solution to the lack of housing inventory.”
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According to MBA’s Builder Application Survey (BAS), mortgage applications for new home purchases increased 4.1 percent compared with a year ago.
“Purchase applications for newly constructed homes declined in April but were up 4 percent compared to a year ago,” said MBA’s Kan. “This was the third straight month of year-over-year growth in applications, which signals improving housing demand for newly built homes at a time when the broader housing market is leaning more on new construction to boost for-sale inventory levels.”
Added Kan, “Since the brief pick-up in new home sales in January when mortgage rates dipped, the pace of new home sales has declined for the three consecutive months. With the recently released Census data showing single-family permitting activity on the upswing and housing starts also rising, we expect that to translate to growth in new home sales activity in the second half of the year.”
According to MBA’s Purchase Applications Payment Index (PAPI), homebuyer affordability declined further in April, with mortgage application payments increasing 0.9 percent to $2,112 from $2,093 in March.
Freddie Mac has expanded its digital capabilities to help lenders reach more qualified buyers. The enhanced capabilities can help lenders calculate income faster and more precisely to improve loan quality, simplify the mortgage process, and most importantly, expand access to credit.
“Over the last year, we’ve consistently rolled out innovations to ensure our digital tools are improving speed and efficiency, reducing risk and, ultimately, helping us serve our mission by reaching more qualified borrowers,” said Kevin Kauffman, Single-Family Vice President of Seller Engagement at Freddie Mac. “Today’s innovation further automates income assessment by using historical direct deposit pay patterns and current gross income from recent paystubs, which can help more families achieve homeownership.”
Additional mortgage activity
- The refinance share of mortgage activity remained unchanged at 27.4 percent of total applications from the previous week.
- The adjustable-rate mortgage (ARM) share of activity increased to 6.7 percent of total applications.
- The FHA share of total applications increased to 12.5 percent from 12.0 percent the week prior.
- The VA share of total applications increased to 12.5 percent from 12.2 percent the week prior.
- The USDA share of total applications increased to 0.5 percent from 0.4 percent the week prior.
This week in mortgage rates
Rates rise again. Here’s how average fixed rates broke down:
- 30-year fixed-rate loans: 6.57% (up from 6.39%)
- 15-year fixed-rate loans: 5.97% (up from 5.75%)
Check back next week for the most up-to-date mortgage and housing news.
May 18 – 30-Year Fixed-Rate Reverts, Applications Wane
On Thursday, May 18, 2023, Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.39 percent, up from last week when it averaged 6.35 percent. A year ago at this time, the 30-year FRM averaged 5.25 percent.
The 15-year fixed-rate mortgage averaged 5.75 percent, unchanged from last week. A year ago at this time, the 15-year FRM averaged 4.43 percent.
“The 30-year fixed-rate mortgage averaged 6.39 percent this week, as economic crosscurrents have kept rates within a ten-basis point range over the last several weeks,” said Sam Khater, Freddie Mac’s Chief Economist. “After the substantial slowdown in growth last fall, home prices stabilized during the winter and began to modestly rise over the last few months. This indicates that while affordability remains a hurdle, homebuyers are getting used to current rates and continue to pursue homeownership.”
According to the Mortgage Bankers Association (MBA), mortgage applications decreased 5.7 percent from one week earlier. The Refinance Index decreased 8 percent from the previous week and was 43 percent lower than the same week one year ago. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 26 percent lower than the same week one year ago.
“Mortgage rates increased last week even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points. Mortgage application activity slowed, as most mortgage rates in the survey increased, with the 30-year fixed-rate jumping nine basis points to its highest level in two months at 6.57 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications decreased 5 percent to its slowest pace in a month, as buyers remain wary of this rate volatility, but also as for-sale inventory in many parts of the country remains scarce.”
Added Kan, “Refinance applications accounted for 27 percent of all applications and dropped almost 8 percent last week. Most borrowers have lower rates on their mortgages, and those who are in the market are extremely rate sensitive.”
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The MBA Opens Doors Foundation received $100,000 from Lennar Mortgage’s 10th Annual Derby, allowing it to deliver further on its mission of providing mortgage and rental assistance to families with critically ill or injured children.
“Every spring our team comes together to raise funds to support Opens Doors and the thousands of families with sick kids who need housing assistance. Not only do hundreds of Lennar Mortgage associates and advocates participate in our annual Derby, but they consistently set the pace for others in the industry to follow suit,” said Laura Escobar, President of Lennar Mortgage, and MBA’s 2023 Vice Chair. “For some on the team, it’s an opportunity to give back to an amazing cause. For others, this is deeply personal and reminds them of times when they too cared for a very sick child. But for all of us, the Derby gives us a sense of pride and gratitude. And what better way than to have fun doing it.”
In other news, the total number of loans now in forbearance decreased from 0.55% in the prior month to 0.51% as of April 30, 2023.
According to the MBA’s newly released Quarterly Mortgage Bankers Performance Report, independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a net loss of $1,972 on each loan they originated in the first quarter of 2023, an improvement from the reported loss of $2,812 per loan in the fourth quarter of 2022.
Additional mortgage activity
- The refinance share of mortgage activity decreased to 27.4 percent of total applications from 28 percent the previous week.
- The adjustable-rate mortgage (ARM) share of activity decreased to 6.5 percent of total applications.
- The FHA share of total applications decreased to 12.0 percent from 12.1 percent the week prior.
- The VA share of total applications decreased to 12.2 percent from 12.9 percent the week prior.
- The USDA share of total applications remained unchanged at 0.4 percent from the week prior.
This week in mortgage rates
30-year rate up while 15-year stays steady. Here’s how average fixed rates broke down:
- 30-year fixed-rate loans: 6.39% (up from 6.35%)
- 15-year fixed-rate loans: 5.75% (unchanged from last week)
Check back next week for the most up-to-date mortgage and housing news.
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