Mortgage Rates and Applications Decline  

On Thursday, June 8, 2023, Freddie Mac released the results of its Primary Mortgage Market Survey^® (PMMS^®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.71 percent, down from last week when it averaged 6.79 percent. A year ago at this time, the 30-year FRM averaged 5.23 percent.

The 15-year fixed-rate mortgage averaged 6.07 percent, down from last week when it averaged 6.18 percent. A year ago at this time, the 15-year FRM averaged 4.38 percent.

“Mortgage rates decreased after a three-week climb,” said Sam Khater, Freddie Mac’s Chief Economist. “While elevated rates and other affordability challenges remain, inventory continues to be the biggest obstacle for prospective homebuyers.”

According to the Mortgage Bankers Association (MBA), mortgage applications decreased 1.4 percent from one week earlier. The Refinance Index decreased 1 percent from the previous week and was 42 percent lower than the same week one year ago. The unadjusted Purchase Index decreased 13 percent compared with the previous week and was 27 percent lower than the same week one year ago.

“Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week. The 30-year fixed rate dipped to 6.81 percent, 10 basis points lower than last week but still the second highest rate of 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Overall applications were more than 30 percent lower than a year ago, as borrowers continue to grapple with the higher rate environment. Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers. There was less of a decline in government purchase applications last week, which was consistent with a growing share of first-time homebuyers in the market.”

More housing and market news

According to the U.S. Bureau of Labor Statistics report, job growth was stronger than anticipated in May, with growth averaging 341,000 jobs per month over the last 12 months. “Despite the increase in job growth, two data points in this report show signs of somewhat weaker labor demand,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Wage growth has slowed to 4.3% over the past 12 months, and the unemployment rate ticked up to 3.7%.”

Fratantoni added, “The household survey, which is the basis for the unemployment rate, is telling a very different story than the establishment survey this month, one showing weakness in employment, the other strength. Several Federal Reserve officials have signaled that they are likely to hold rates steady at their upcoming June meeting but are unlikely to reduce rates anytime soon. This somewhat mixed jobs report is likely to support that approach. The housing market continues to struggle against a lack of supply. A strong job market helps housing demand, particularly in the face of challenging affordability.”

Freddie Mac announced it is launching a new mortgage product, called HeritageOne, that will expand financing for affordable housing in Native American communities. It will also provide financial counseling and other resources to members of Native American tribes.

“With HeritageOne, we are again breaking new ground in our efforts to safely and responsibly expand opportunities in traditionally underserved communities,” said Sonu Mittal, Single-Family Senior Vice President of Acquisitions at Freddie Mac. “Our commitment to make home possible for Native American families not only requires long-term planning and prudent execution, but strong partnerships with industry members and tribal leaders. Through this collaboration, we can help create more affordable mortgage options in tribal lands and rural areas.”

Additional mortgage activity  

• The refinance share of mortgage activity increased to 27.3 percent of total applications from 26.7 percent the previous week.
• The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.8 percent of total applications.
• The FHA share of total applications increased to 13.2 percent from 12.7 percent the week prior.
• The VA share of total applications increased to 12.5 percent from 12.1 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

Rates decrease. Here’s how average fixed rates broke down:

• 30-year fixed-rate loans: 6.71% (down from 6.79%)
• 15-year fixed-rate loans: 6.07% (down from 6.18%)

Check back next week for the most up-to-date mortgage and housing news.

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June 1 – 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.”

More housing and market news

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.

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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.”

More housing and market news

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.

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