Homebuyers Showing ‘Some Resiliency’ to Higher Rates

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A lender survey shows demand for purchase mortgages rose for a second week in a row, but borrowers are increasingly turning to adjustable-rate loans.

Homebuyers continue to show signs they won’t be deterred by rising mortgage rates, with demand for purchase mortgages increasing for a second week in a row last week, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).

Data from the MBA’s Weekly Mortgage Applications Survey released Wednesday showed demand for purchase loans was up a seasonally adjusted 5 percent last week compared to the week before, but down 8 percent from a year ago.

Joel Kan

“The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level – 5.53 percent – since 2009,” said MBA forecaster Joel Kan, in a statement. “Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks.”

The survey showed rising rates have hit the refinancing market harder, with demand for mortgage refis down 2 percent from the week before, and 72 percent from a year ago.

Borrowers are increasingly turning to adjustable-rate mortgage (ARM) loans, with requests for ARMs up 19.7 percent week-over-week, and 49 percent from a year ago. Requests for ARM loans accounted for 10.8 percent of all applications last week, and at $740,400, the average ARM loan request was nearly twice the average fixed-rate loan request of $379,400. That means borrowers seeking ARM loans accounted for 19.4 percent of applications by dollar volume.

In addition to resorting to ARM loans, borrowers are increasingly willing to pay “points” to buy down their interest rate, according to an analysis by mortgage data and technology provider Black Knight.

Although mortgage rates have climbed at a relentless pace this year, some relief could be in sight after Federal Reserve policymakers last week detailed plans to trim the Fed’s $9 trillion balance sheet. While the Fed will let up to $17.5 billion in mortgage debt roll off the books in June, July and August, that’s a less aggressive approach than some inflation hawks had advocated.

After rising more than two full percentage points this year — from 3.409 percent on Jan. 3 to 5.593 percent on May 6 — rates on 30-year fixed-rate mortgages declined Monday and Tuesday, retreating to 5.490 percent, according to the Optimal Blue Mortgage Market Indices (OBMMI).

Mortgage rates level off


For the week ending May 6, the MBA reported average rates for the following loan types:

  • For 30-year fixed-rate conforming mortgages (with loan balances of $647,200 or less), rates averaged 5.53 percent, up from 5.36 percent the week before. With points increasing to 0.73 from 0.63 (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 $647,200) averaged 5.08 percent, up from 4.92 percent the week before. With points decreasing to 0.42 from 0.43 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 5.37 percent, up from 5.27 percent the week before. With points increasing to 0.87 from 0.85 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • Rates for 15-year fixed-rate mortgages, which are popular with homeowners refinancing, averaged 4.79 percent, up from 4.68 percent the week before. With points increasing to 0.80 from 0.76 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 5/1 ARMs, rates averaged 4.47 percent, up from 4.25 percent the week before. Although points decreased to 0.73 from 0.78 (including the origination fee) for 80 percent LTV loans, the effective rate still increased.

Get Inman’s Extra Credit 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



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https://www.inman.com/2022/05/11/homebuyers-showing-some-resiliency-to-higher-rates/

A lender survey shows demand for purchase mortgages rose for a second week in a row, but borrowers are increasingly turning to adjustable-rate loans.

Homebuyers continue to show signs they won’t be deterred by rising mortgage rates, with demand for purchase mortgages increasing for a second week in a row last week, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).

Data from the MBA’s Weekly Mortgage Applications Survey released Wednesday showed demand for purchase loans was up a seasonally adjusted 5 percent last week compared to the week before, but down 8 percent from a year ago.

Joel Kan

“The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level – 5.53 percent – since 2009,” said MBA forecaster Joel Kan, in a statement. “Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks.”

The survey showed rising rates have hit the refinancing market harder, with demand for mortgage refis down 2 percent from the week before, and 72 percent from a year ago.

Borrowers are increasingly turning to adjustable-rate mortgage (ARM) loans, with requests for ARMs up 19.7 percent week-over-week, and 49 percent from a year ago. Requests for ARM loans accounted for 10.8 percent of all applications last week, and at $740,400, the average ARM loan request was nearly twice the average fixed-rate loan request of $379,400. That means borrowers seeking ARM loans accounted for 19.4 percent of applications by dollar volume.

In addition to resorting to ARM loans, borrowers are increasingly willing to pay “points” to buy down their interest rate, according to an analysis by mortgage data and technology provider Black Knight.

Although mortgage rates have climbed at a relentless pace this year, some relief could be in sight after Federal Reserve policymakers last week detailed plans to trim the Fed’s $9 trillion balance sheet. While the Fed will let up to $17.5 billion in mortgage debt roll off the books in June, July and August, that’s a less aggressive approach than some inflation hawks had advocated.

After rising more than two full percentage points this year — from 3.409 percent on Jan. 3 to 5.593 percent on May 6 — rates on 30-year fixed-rate mortgages declined Monday and Tuesday, retreating to 5.490 percent, according to the Optimal Blue Mortgage Market Indices (OBMMI).

Mortgage rates level off


For the week ending May 6, the MBA reported average rates for the following loan types:

  • For 30-year fixed-rate conforming mortgages (with loan balances of $647,200 or less), rates averaged 5.53 percent, up from 5.36 percent the week before. With points increasing to 0.73 from 0.63 (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 $647,200) averaged 5.08 percent, up from 4.92 percent the week before. With points decreasing to 0.42 from 0.43 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 5.37 percent, up from 5.27 percent the week before. With points increasing to 0.87 from 0.85 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • Rates for 15-year fixed-rate mortgages, which are popular with homeowners refinancing, averaged 4.79 percent, up from 4.68 percent the week before. With points increasing to 0.80 from 0.76 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 5/1 ARMs, rates averaged 4.47 percent, up from 4.25 percent the week before. Although points decreased to 0.73 from 0.78 (including the origination fee) for 80 percent LTV loans, the effective rate still increased.

Get Inman’s Extra Credit 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


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