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Homebuyer demand for purchase loans sagged again last week as rates rose to new 2023 highs and homes remained scarce in many markets, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).
The MBA’s Weekly Mortgage Applications Survey showed requests for purchase loans fell by a seasonally adjusted 3 percent last week when compared to the week before, and were down 31 percent from a year ago. Applications to refinance were down 7 percent from the week before and 45 percent from a year ago.
Mike Fratantoni
“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,” MBA Chief Economist Mike Fratantoni said in a statement. “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.”
Although some economists have been forecasting that mortgage rates would ease later this year and next, recent inflation data has some Federal Reserve policymakers talking about raising rates again, rather than rolling them back this year.
The CME FedWatch Tool, which monitors futures markets to gauge investor sentiment of the Fed’s next moves, puts the odds of another Fed rate hike on June 14 at 67 percent.
Some borrowers can expect to be offered rates above 7 percent
Under current market conditions, borrowers with less than perfect credit and putting less than 20 percent down are more likely to be offered rates at or above 7 percent, according to rate lock data collected by Optimal Blue.
“Application volumes for both purchase and refinance loans decreased last week due to these higher rates,” Fratantoni said. “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.”
For the week ending May 26, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 6.91 percent, up from 6.69 percent the week before. With points increasing to 0.83 from 0.66 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
- Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 6.78 percent, up from 6.57 percent the week before. With points increasing to 0.76 from 0.57 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
- For 30-year fixed-rate FHA mortgages, rates averaged 6.85 percent, up from 6.56 percent the week before. With points increasing to 1.26 from 1.24 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
- Rates for 15-year fixed-rate mortgages averaged 6.41 percent, up from 6.15 percent the week before. With points increasing to 0.84 from 0.72 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
- For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.39 percent, down from 5.73 percent the week before. Although points decreased to 0.46 from 1.19 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
With rates for fixed-rate mortgages hitting new 2023 high, ARM loan are looking somewhat more attractive to borrowers. Requests fo ARM loans accounted for 6.8 percent of applications last week, up from 6 percent during the first week of April.
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