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

Thinking of Refinancing? Consider These 3 Things

2022-04-12T11:20:37-05:00

Refinancing your mortgage loan can save you money. However, here are factors to consider to make sure it’s the right choice for you. Interest Rates Lower interest rates are a leading cause for homeowners who want to refinance. The goal, of course, is to lower your monthly payment. But lowering a monthly payment alone won’t always save you money. Understand the new loan’s term and any fees associated with refinancing to make sure you’re seeing the whole picture.  Credit Score Your credit score played a large part in the interest rate on your existing mortgage, and it has similar influence over any refinanced loan. If your credit score has dropped and you can’t qualify for a lower rate, refinancing may not help you financially. Mortgage History Where are you on your current mortgage? If you’re towards the end of your loan term, refinancing may have not make sense. If you’re thinking about refinancing, make sure you first identify your financial goals. Then talk to a lender about how to make those goals happen.  

Thinking of Refinancing? Consider These 3 Things2022-04-12T11:20:37-05:00

Mortgage Rates Reach 3-Year High

2022-04-06T11:32:27-05:00

By Litic Murali on April 6, 2022 • In the past month, total mortgage activity, as measured by the Mortgage Bankers Association’s (MBA) Market Composite Index, underwent a series of weekly declines, decreasing in the latest week by 6.3 percent. The latest week’s survey is for the week ending April 1. The latest week’s activity consisted of a 3.4 percent decrease in purchasing and a 9.9 percent decrease in refinancing. The current month’s 30-year fixed-rate mortgage rates averaged 4.6 percent, compared to 3.1 percent in the previous month. The latest weekly rate of 4.9 percent was 10 basis points higher than the week before. This is the highest it has been in over three years. The MBA attributes financial markets’ expectations of tighter monetary policy in coming months as the cause of the weekly surges. The hot job market and wage growth continue to support housing demand despite much higher rates, although some demand-side measures are weakening. For example, the March NAHB/Wells Fargo HMI measure of future new home sales fell a notable 10 points. Insufficient for-sale inventory continues to restrain purchase activity and elevated average loan sizes continue to price out first-time homebuyers. On an unadjusted basis, the Purchasing Index showed a year-over-year decline of 9 percent, i.e., compared to the same week one year ago. For the same comparison period, the Refinancing Index showed a 62 percent decline. The refinance share of mortgage activity decreased to 38.8 percent of total applications from 40.6 percent the previous week and from 51 percent one year ago. The adjustable-rate mortgage (ARM) share of activity increased to 6.8 percent of total applications. The FHA share of total applications decreased to 9.2 percent from 9.3 percent the week prior. Related ‹ Rural Markets’ Home Building Market Shares in 2021Tags: 30-year fixed-rate mortgage, first-time buyers, home mortgage, housing demand, inventory, job growth, monetary policy, mortgage bankers association, new home sales, refinancing, wage growth

Mortgage Rates Reach 3-Year High2022-04-06T11:32:27-05:00

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