Homebuyers Balk As Mortgage Rates Head Back Up

Purchase loan applications have been flat for two consecutive weeks, and now mortgage rates are popping again as more worrisome inflation data rolls in.

Join the movement at Inman Connect Las Vegas, July 30 – August 1! Seize the moment to take charge of the next era in real estate. Through immersive experiences, innovative formats, and an unparalleled lineup of speakers, this gathering becomes more than a conference — it becomes a collaborative force shaping the future of our industry. Secure your tickets now!

Mortgage rates are popping again this week as more worrisome inflation data rolls in — another potential drag on the spring homebuying season coming on the heels of two consecutive weeks of stagnant homebuyer demand for purchase loans.

After a seasonal adjustment for the usual increase in spring applications, requests for purchase loans were down 0.1 percent last week when compared to the week before, according to a weekly survey of lenders by the Mortgage Bankers Association. Looking back a year, purchase loan applications were down 13 percent.

Joel Kan

“Elevated mortgage rates continued to weigh down on home buying,” MBA Deputy Chief Economist Joel Kan said in a statement Wednesday. “Purchase applications were unchanged overall, although FHA purchases did pick up slightly over the week. Refinance applications decreased to fall 5 percent below last year’s pace.”

Demand for purchase loans was also essentially flat during the week ending March 22, the MBA reported last week. After surging in the days leading up to the Federal Reserve’s March 20 meeting on a series of worrisome inflation reports, last week mortgage rates retreated to levels not seen since early March.

But now rates are on the rise again, even after Friday’s release of the personal consumption expenditures (PCE) price index was in line with economists’ expectations, leaving hopes for a June Fed rate cut alive.

The PCE index is the central bank’s preferred gauge of inflation, and Fed Chair Jerome Powell told Marketplace’s Kai Ryssdal Friday that the latest numbers were “definitely more along the lines of what we want to see.”

But Fed policymakers have said they want more evidence that inflation is headed toward their 2 percent target, and new data released this week did not provide such assurances.

A report Monday from the Institute for Supply Management showed the manufacturing sector expanded in March after contracting for 16 consecutive months, while Tuesday’s release of the latest Job Openings and Labor Turnover Survey (JOLTS) showed continued strength in jobs openings, hiring and wages in February.

In a speech Wednesday at the Stanford Graduate School of Business, Powell reiterated that he expects the central bank to cut rates this year, but bond market investors who fund most mortgages think the odds are rising that the Fed may wait until July.

The CME FedWatch Tool, which tracks futures markets to gauge the likelihood of future Fed moves, showed investors were still pricing in a 62 percent chance that the Fed will start cutting rates in June. However, that’s down from 70 percent a week ago.

Mortgage rates approaching 2024 highs

Loan lock data tracked by Optimal Blue showed borrowers were locking in rates on 30-year fixed-rate mortgages Tuesday at an average rate of 6.86 percent, up 36 basis points from 2024 low of 6.50 percent registered on Feb. 1 and approaching this year’s high of 6.93 percent, seen on Feb. 28.

For the week ending March 29, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $766,550 or less), rates averaged 6.91 percent, down from 6.93 percent the week before. With points decreasing to 0.59 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $766,550) averaged 7.06 percent, down from 7.14 percent the week before. Although points increased to 0.57 from 0.38 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.74 percent, down from 6.75 percent the week before. With points decreasing to 0.90 from 0.97 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • Rates for 15-year fixed-rate mortgages averaged 6.35 percent, down from 6.46 percent the week before. With points decreasing to 0.56 from 0.75 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 6.37 percent, up from 6.27 percent the week before. With points increasing to 0.68 from 0.64 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

Source link