As interest rates continue to increase, borrowers are increasingly utilizing adjustable rate mortgages, according to the latest Ellie Mae Origination Insight Report.
The average 30-year interest rate for all loans rose to an average 5.01%, the highest point in 2018 and up from 4.91% in September, the report showed.
Possibly due to this, the percentage of adjustable rate mortgages rose to 8.2% in October, up from 7.2% in September.
“As interest rates continue to rise, the percentage of adjustable rate mortgages is increasing as homebuyers are looking to take advantage of the best rates from their lenders,” said Jonathan Corr, Ellie Mae president and CEO.
“Additionally, FICO scores remain the highest we’ve seen in 2018, indicating that lenders are not yet loosening credit availability to attract the shrinking refinance market,” Corr said. “We’ll continue to watch this trend into the winter months.”
But interest rates aren’t the only thing increasing. Closing rates also hit a new high for 2018 in October.
The closing rates for all loans increased to 72.2% in October, the highest point in 2018 and up from 71.7 the month before, the report showed.
The increase in closing rates was driven by refinances, which rose from 64.4% to 64.9% month-over-month. Purchase closing rates held steady at 76.4% for the second consecutive month.
Ellie Mae’s report also showed the time it takes to close all loans increased to 45 days in October, up from 44 days the month before. The time it takes to close a purchase loan increased to 46 days, up from 45 days in September, while to the to close a refinance increased to 43 days, up from 42 days the month before.
The percentage of purchase loans dropped to 68% of all loans, down from 71% in September. Refis made up 32% of total loans in October, up from 29% the month before.
Average FICO scores remained steady at 727 in October, while LTV held at 79% for the third consecutive month and DTI increased to 26/39.