High Rates Suppress Refinancing

2022-06-08T11:16:31-05:00

By Litic Murali on June 8, 2022 • Per the Mortgage Bankers Association (MBA), through the week ending June 3, total mortgage activity decreased, with the 30-year fixed-rate mortgage (FRM) rate increasing to 5.45%, on average. The latest week’s rate increased to 5.4%, after 3 consecutive weeks of declines, each by a few basis points. The Market Composite Index, a measure of mortgage loan application volume, decreased by 6.5% on a seasonally adjusted basis from one week earlier, with purchasing decreasing by 7.1% and refinancing decreasing by 5.6%. Historically, refinancing has always been higher than purchasing activity. The recent months’ data, however, indicate that the gap between the levels of purchasing and refinancing has narrowed significantly, with May’s refinancing activity 3.4 times greater than purchasing activity. In contrast, throughout the pandemic, refinancing levels relative to purchasing levels were in the low double digits. The MBA states that high rates have suppressed refinancing and that rates and low housing inventory have negatively affected the purchasing market. Worsening affordability challenges have been particularly hard on prospective home buyers. On an unadjusted basis, the Purchasing Index showed a 21% year-over-year decline and the Refinancing Index showed a 75% year-over-year decline. Comparison of the year-over-year percent changes in refinancing and purchasing shows that from October 2021 to present, refinancing has been hit harder. The refinance share of mortgage activity increased to 32.2 percent of total applications from 31.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.2 percent of total applications. Related ‹ Large Metro Suburban Single-family Construction SlowsTags: 30-year fixed-rate mortgage, adjustable-rate mortgage, affordability, COVID-19, home mortgage, inventory, mortgage bankers association, refinancing

High Rates Suppress Refinancing2022-06-08T11:16:31-05:00

Mortgage Activity Up in ARMs

2022-05-11T15:16:06-05:00

By Litic Murali on May 11, 2022 • Per the Mortgage Bankers Association’s (MBA) latest month’s surveys (the week ending May 6), the 30-year fixed-rate mortgage (FRM) rate rapidly grew to 5.53%, marking the steepest interest rate increase on record. The Market Composite Index, a measure of mortgage loan application volume, increased by 2% on a seasonally adjusted basis from one week earlier, despite a general downward trend.  Prospective buyers are showing some resiliency to higher rates, partly due to utilization of adjustable-rate mortgages (ARMs), per the MBA. ARMs typically have lower rates than their fixed-rate counterparts but more volatility following a predetermined period (usually 5 years) after which the rate becomes variable. ARMs’ lower rates also reduce a mortgage’s monthly payment. In the latest week, the percentage of ARM originations, in terms of loan volume, was 10.8%. This figure is nearly double what it was one month ago. On dollar terms, ARM originations made up 19.4% of new mortgage debt. Total mortgage activity has been trending downward, but the last two weeks have shown an uptick in Purchasing, which increased by 0.5% on a seasonally adjusted basis. It still has been exhibiting monthly declines. Refinancing, on the other hand, has continued trending downward through the latest week.  The latest week’s FRM rate was 17 basis points higher than the previous week. The ARM interest rate used above represents that of a “5/1 ARM”, i.e., a 5-year period of a predetermined interest rate followed by a variable rate that changes every year, subject to market conditions. Its weekly changes also trail behind those of the FRM’s interest rate. All figures above are not seasonally adjusted. In the latest week, the average contract interest rate for 5/1 ARMs increased to 4.47 percent from 4.25 percent. On an unadjusted basis, the Purchasing Index showed an 8% year-over-year decline and the Refinancing Index showed a 72% year-over-year decline. Related ‹ Inflation Slows from 40-Year High in AprilTags: 30-year fixed-rate mortgage, adjustable-rate mortgage, home purchases, interest rates, mortgage bankers association, mortgage originations, refinancing

Mortgage Activity Up in ARMs2022-05-11T15:16:06-05:00

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