Rising mortgage rates can push borrowers off the fence

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Rising mortgage rates can fuel interest in both home buying and refinancing, with some borrowers trying to hold rates now before they get much higher.

A weekly survey of lenders by the Mortgage Bankers Association found that demand for purchase loans rose 5 percent, seasonally adjusted, last week compared to the previous week, but fell 4 percent year-on-year.

Homeowner applications for refinancing existing mortgages rose 0.4 percent week-to-week, but declined 34 percent year over year when interest rates were closer to historic lows in January.

Joel Kan

“Financial markets will continue to recognize the Federal Reserve’s policy direction in the coming months in the current high growth and high inflation environment,” MBA forecaster Joel Kan said in a statement.

“Despite the rise in interest rates, refinancing requests rose slightly, driven by a 2 percent increase in conventional refinancing,” said Kan. “Borrowers continue to freeze mortgages pending higher interest rates in the future.”

For the week ending November 19, the MBA reported average interest rates on the following loan types:

  • To the 30 year fixed rate mortgage (Loan balances of $ 548,250 or less) averaged 3.24 percent, down from 3.20 percent the week before. As the points dropped from 0.43 (including the subscription fee) for loans with a loan-to-value ratio (LTV) of 80 percent to 0.36, the effective interest rate also rose to 3.35 percent from last week .
  • Installments for 30 years of fixed interest Jumbo mortgages (Loan balances over $ 548,250) averaged 3.28 percent, down from 3.26 percent the previous week. But as the points fell from 0.39 to 0.26, the effective interest rate fell from last week to 3.35 percent.
  • Fixed rate for 30 years FHA mortgages, Rates averaged 3.27 percent, down from 3.23 percent the week earlier. Although the points fell from 0.41 to 0.34, the effective rate rose to 3.37 percent from last week.
  • prices for 15-year fixed-rate mortgages an average of 2.59 percent compared to 2.56 percent in the previous week. Although the points fell from 0.36 to 0.34, the effective rate also rose to 2.68 percent from last week.
  • To the 5/1 adjustable rate mortgage loan (ARM)The rates averaged 3.00 percent, compared to 2.89 percent in the previous week. With an increase in the points from 0.16 to 0.32, the effective interest rate rose to 3.11 percent compared to the previous week.

Concerns about inflation and the Federal Reserve’s recent decision to cut support for the mortgage markets have pushed mortgage rates higher.

Led by Chairman Jerome Powell, the Fed increased its holdings of government bonds and mortgage-backed securities by $ 120 billion a month during the pandemic. That month, the Fed began cutting those purchases by $ 15 billion a month with a goal of ending them by June.

Fed schedule to reduce bond purchases

Source: Federal Reserve Open Market Committee

Powell said he was not in favor of raising short-term rates until the Fed scaled back its bond purchases. Some inflation hawks say that the Fed, under Powell’s leadership, has gone too far to prop the economy and that inflation may get out of hand.

President Biden this week nominated Powell for a second term as Fed chairman, saying he “took steady leadership during an unprecedentedly difficult period including the largest economic downturn in modern history and attacks on the independence of the Federal Reserve.”

Powell was nominated by President Obama to the Federal Reserve Board of Governors in 2011 and was chosen by President Trump to succeed Janet Yellen as Fed Chairman in 2018.

Even though some proponents from a more permissive Fed had hoped that Biden would appoint Fed governor Lael Brainard to replace Powell, and Biden nominated her as vice chairman instead.

Rep. Pramila Jayapal, a Washington State Democrat and chairwoman of the Congressional Progressive Caucus, said in a opinion that Powell “has shown an unprecedented commitment to full employment” during his first tenure.

“I am pleased that the president has nominated two vocal supporters of full employment who have repeatedly shown their willingness to withstand the pressure of the partisans, and I hope their nominations will be quickly confirmed by the Senate,” said Jayapal.

Forecasts are divided on how fast mortgage rates will rise if the Fed cuts support to the mortgage markets. In their latest forecast, Fannie Mae economists said it is likely that financial markets have already “baked in” expectations for a Fed tightening and that interest rates will rise gradually over the next several years.

Mortgage Rate Forecasts


Fannie Mae economists estimate that 30-year mortgage rates will stand at 3.4 percent by the end of 2022 and then settle at 3.5 percent in the last nine months of 2023.

Less convinced that inflation will prove temporary, economists at the Mortgage Bankers Association predict that 30-year mortgage rates will climb to 4.3 percent by the second half of 2023.

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