Rising mortgage rates can boost interest in both home buying and refinancing, with some borrowers looking to lock in rates now before they go up much more.
A weekly survey of lenders by the Mortgage Bankers Association found that requests for purchase loans were up 5% seasonally adjusted last week from a week ago, but were down 4% from a year ago. to a year ago.
Homeowner refinancing requests for existing mortgages rose 0.4% week-over-week, but down 34% from a year ago when interest rates were higher. close to the historical lows observed in January.
“Financial markets continue to discern the direction of the Federal Reserve’s policy over the coming months in light of the current environment of high growth and high inflation,” said MBA forecaster Joel Kan, in a statement.
“Despite the increase in rates, refinancing requests increased slightly, driven by a 2% gain from conventional refinancings,” Kan said. “Borrowers continue to lock in mortgages in anticipation of higher rates in the future.”
The MBA reported average rates for the following loan types during the week ending November 19:
- For 30 Year Fixed Rate Compliant Mortgages (loan balance of $ 548,250 or less) rates averaged 3.24%, up from 3.20% the week before. With points dropping from 0.43 (including origination fees) to 0.36 for loans with a loan-to-value ratio (LTV) of 80 percent, the effective rate also increased from last week, at 3.35 percent.
- Rate for 30 years at fixed rate giant mortgages (loan balance greater than $ 548,250) averaged 3.28%, down from 3.26% the week before. But with points declining to 0.26 from 0.39, the effective rate fell from last week, to 3.35%.
- For a fixed rate of 30 years FHA Mortgages, rates were on average 3.27 percent, down from 3.23 percent the week before. Although the points fell to 0.34 from 0.41, the effective rate also increased from last week, to 3.37 percent.
- Rates for 15-year fixed rate mortgages on average 2.59%, against 2.56% the previous week. Although the points fell to 0.34 from 0.36, the effective rate also increased from last week, to 2.68%.
- For 5/1 Adjustable rate mortgages (ARM), rates averaged 3.00 percent, down from 2.89 percent the week before. With points falling from 0.16 to 0.32, the effective rate also rose from last week, to 3.11%.
Inflation concerns, coupled with the Federal Reserve’s recent decision to start reducing its support for mortgage markets, have put upward pressure on mortgage rates.
Under President Jerome Powell’s leadership, the Fed increased its holdings of government debt and mortgage-backed securities by $ 120 billion per month during the pandemic. This month, the Fed began cutting those purchases by $ 15 billion per month, with the goal of ending them by June.
Fed timetable to reduce asset purchases
Powell has said he is not in favor of a short-term rate hike until the Fed finishes cutting back on asset purchases. Some inflation hawks say the Fed, under Powell’s leadership, has gone too far in trying to prop up the economy, and inflation could get out of hand.
President Biden this week nominated Powell for a second term as Fed chairman, claiming he has “provided consistent leadership through an unprecedentedly difficult time, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve “.
Powell was appointed in 2011 by President Obama to serve on the Federal Reserve Board of Governors and was chosen by President Trump to succeed Janet Yellen as Fed Chairman in 2018.
Even if some supporters of a more permissive Fed had hoped that Biden would appoint Fed Governor Lael Brainard to replace Powell, Biden instead appointed her as vice president.
Representative Pramila Jayapal, a Democrat from Washington state who chairs the Progressive Congressional Caucus, said in a declaration that Powell “demonstrated an unprecedented commitment to full employment” during his first term.
“I am happy that the president has appointed two supporters of full employment who have repeatedly shown their willingness to resist partisan pressure, and I hope their appointments will be quickly confirmed by the Senate,” Jayapal said.
Forecasters are divided on how quickly mortgage rates will rise as the Fed eases its support for mortgage markets. In their latest forecast, Fannie Mae economists said it was likely that financial markets have already “built in” expectations of a Fed cut, and that rates will gradually rise over the next few years.
Mortgage rate forecasts
Fannie Mae economists see 30-year mortgage rates hitting 3.4% by the end of 2022, then stabilizing at 3.5% in the last nine months of 2023.
Mortgage Bankers Association economists are less convinced that inflation will prove transient and predict that 30-year mortgage rates will rise to 4.3% by the second half of 2023.
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Email Matt Carter