Mortgage

Fear of even higher mortgage rates may be heating up winter homebuying

Fear of even higher mortgage rates may be heating up winter homebuying
Written by Publishing Team

An “Open House” sign is displayed in the front yard of a home for sale in Columbus, Ohio.

Thai Wright | Bloomberg via Getty Images

Mortgage rates have moved to their highest level in more than a year, and that could be causing potential homebuyers to worry that the affordability window will close faster than expected. Home prices are still on the rise, and winter has historically been the slowest season for the housing market, but mortgage demand from buyers is up.

The volume of purchase orders last week was up 2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This is ironic from anecdotal comments from real estate agents that they are seeing higher-than-normal demand in early January. Orders were still 17% lower than the same week a year ago, but some of that is due to lower market supply. The show usually increases in December, but it hasn’t happened in the last month.

That’s because the average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased to 3.52% from 3.33%, with points dropping to 0.45 from 0.48 (including creation fees) For loans with 20% down payment. This is the highest rate since March 2020. It fell by 64 basis points in the same week a year ago.

“Mortgage rates rose significantly across all loan types last week, as the Federal Reserve’s signal for future policy tightening drove US Treasury yields up,” said Joel Kahn, MBA economist. “The 2022 housing market started on a strong note. Both traditional and government applications showed increases, with FHA applications increasing nearly 9%, and VA applications increasing more than 5%.”

FHA and FHA loans are low and first-time buyers don’t often use advance payment options.

Home loan refinancing requests were down 0.1% from the previous week and were 50% lower than the same week a year ago. Refinancing volume is now at its lowest level in more than a month. With rising mortgage rates, fewer and fewer borrowers can benefit from refinancing.

Mortgage rates rose sharply on Monday of this week, according to daily mortgage news, but flattened slightly on Tuesday.

The big question now is whether the worst is over now for this sudden movement towards higher rates. The final answer is “Maybe!” “Maybe it may be,” wrote Matthew Graham, chief operating officer of Mortgage News Daily, “Unfortunately, that doesn’t mean rates can’t go up, the pace may simply be moderate from here.” “

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