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.
May 11 – Mortgage Rates Inch Down and Applications Rise
On Thursday, May 11, 2023, Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.35 percent, down from last week when it averaged 6.39 percent. A year ago at this time, the 30-year FRM averaged 5.30 percent.
The 15-year fixed-rate mortgage averaged 5.75 percent, down slightly from last week when it averaged 5.76 percent. A year ago at this time, the 15-year FRM averaged 4.48 percent.
“This week’s decrease continues a recent sideways trend in mortgage rates, which is a welcome departure from the record increases of last year,” said Sam Khater, Freddie Mac’s Chief Economist. “While inflation remains elevated, its rate of growth has moderated and is expected to decelerate over the remainder of 2023. This should bode well for the trajectory of mortgage rates over the long-term.”
According to the Mortgage Bankers Association (MBA), mortgage applications increased 6.3 percent from one week earlier. The Refinance Index increased 10 percent from the previous week and was 44 percent lower than the same week one year ago. The unadjusted Purchase Index increased 5.3 percent compared with the previous week and was 32 percent lower than the same week one year ago.
“Mortgage applications responded positively to a drop in rates last week, as the Fed signaled a potential pause at the current level for the federal funds rate in anticipation of inflation slowing and tightening financial conditions that will slow economic and job growth. Mortgage rates for all surveyed loan types decreased over the week with the 30-year fixed rate at 6.48 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications increased 5 percent last week but were still more than 30 percent below last year’s level. Lower rates from week to week have helped buyers in the market, but limited for-sale inventory remains a challenge for many homebuyers. Refinance activity jumped 10 percent to its highest levels since September 2022, although there is only a small pool of borrowers who can benefit from refinancing with rates at these levels.”
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According to MBS’ Market Credit Availability Index (MCAI), mortgage credit availability decreased by 0.9 percent to 99.6 in April.
“Mortgage credit availability declined in April to the lowest level since January 2013, reflecting the tightening in broader credit conditions stemming from recent banking sector challenges and an uncertain economic outlook,” said MBA’s Kan. “The contraction was driven by reduced demand for loan programs such as certain adjustable-rate mortgages loans, cash-out and streamline refinances, and those with lower credit score requirements. Government credit supply decreased for the third consecutive month, as industry capacity continues to adjust to significantly reduced origination volume, along with the expectations of a weakening economy later this year.”
Commercial and multifamily mortgage loan originations were 56 percent lower in the first quarter compared with a year ago according to MBA’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
“While the first quarter is typically the quietest quarter of the year, borrowing and lending backed by commercial and multifamily properties declined in the first quarter to the slowest pace since the first quarter of 2014,” said Jamie Woodwell, MBA’s Head of Commercial Real Estate Research. “Uncertainty and volatility in regard to interest rates and property values, and supply and demand imbalances for some property types, has led to a logjam in commercial real estate sales and financing markets.”
Additional mortgage activity
- The refinance share of mortgage activity increased to 28 percent of total applications from 27.2 percent the previous week.
- The adjustable-rate mortgage (ARM) share of activity decreased to 6.8 percent of total applications.
- The FHA share of total applications decreased to 12.1 percent from 12.5 percent the week prior.
- The VA share of total applications increased to 12.9 percent from 11.3 percent the week prior.
- The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.
This week in mortgage rates
Fixed rates inch down. Here’s how average fixed rates broke down:
- 30-year fixed-rate loans: 6.35% (down from 6.39%)
- 15-year fixed-rate loans: 5.75% (down from 5.76%)
Check back next week for the most up-to-date mortgage and housing news.
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