Potential homebuyers arrive for an open house in Redondo Beach, California
Total volume fell 0.8 percent last week from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association. Volume is still 10 percent higher than a year ago, largely due to stronger demand for home purchases.
Applications to refinance a mortgage fell 1 percent for the week and are 4 percent higher than a year ago, on a seasonally adjusted basis. Applications to purchase a home fell 1 percent but were 20 percent higher than a year ago.
Potential homebuyers arrive for an open house in Redondo Beach, California.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.01 percent from 3.98 percent, with points increasing to 0.47 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio loans.
Rates are now moving higher at the fastest pace since early June. They began their climb after the Federal Reserve signaled the possibility that it could raise rates in December. Some had thought that was off the table, given recent weak employment readings. The fact that rates are rising in anticipation of a potential Fed hike says more about the future of rates than the present.
“The troubling consideration is that the recent lows now run the risk of being cemented as a longer-term floor,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “With expectations for a December rate hike from the Fed, longer term rates (like mortgages) will have a hard time to committing to any significant move lower unless something happens that is clearly seen as staying the Fed’s hiking hand.”
That “something” could be the October employment report, set for release Friday.
Home sales have been slowing in October, according to various real estate sales companies. Part of this is seasonal, but it also has to do with higher home prices, weak inventory and still tighter-than-normal access to credit.
“Challenges on both the supply and demand side appear to be slowing down existing home sales,” said Rick Sharga, Auction.com executive vice president. “Inventory levels remain stubbornly low, especially for entry-level buyers, despite rising home prices, and credit is still very tight for the average borrower.”
Mortgage volume had been increasing on the purchase side, thanks to a strong spring/summer sales pace. Purchase originations in June were the highest in eight years, according to Black Knight Financial Services. The purchase lending, however, is being driven almost entirely by high-credit borrowers.
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