Purchase mortgage rates this week averaged 5.30%, up three basis points from a week ago, causing homeowners’ monthly payments to increase by about one-third year-over-year, according to the latest Freddie Mac PMMS.
Borrowers continue displaying resilience, but higher rates expected in coming months could reduce the overall appetite for mortgage loans.
“In the months ahead, we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth,” said Sam Khater, Freddie Mac’s chief economist, in a statement.
This time a year ago, the 30-year fixed-rate purchase rates were at 2.94%, the report shows. The government-sponsored enterprise (GSE) index accounts for just purchase mortgages reported by lenders during the past three days.
Another index shows rates hovering at a higher mark. The Black Knight‘s Optimal Blue OBMMI, which includes some refinancing data – but excludes cash-out refis to avoid skewing averages, as they typically have loan-level price adjustments – measured the 30-year conforming mortgage rate at 5.51% Wednesday, down from 5.52% a week prior. Meanwhile, the 30-year fixed-rate jumbo was at 5% Wednesday, down from 5.04% the previous week.
So far, according to Khater, homebuyers have shown a willingness to adapt to changing conditions.
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“Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership,” he said.
This week, mortgage applications rose 2% from the past week: Refi applications were up 0.2% and purchase apps increased 4%, according to the MBA. The report found the adjustable-rate mortgage share increased to 10.8% of total applications, consisting of 19% of dollar volume.
Mortgage rates are following the Federal Reserve’s (Fed) inflation-fighting monetary policy. The central bank raised the interest rate by a half percentage point May 4 and announced a plan to reduce the $9 trillion asset portfolio, which ballooned during the pandemic. The Fed repeatedly has signaled it would raise rates six times this year with several more planned in 2023.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.48% with an average of 0.9 point, down from 4.52% the week prior. The 15-year fixed-rate mortgage averaged 2.26% last year.
The 5-year ARM averaged 3.98% with buyers on average paying for 0.3 point, up slightly from last week’s average of 3.96%. The product averaged 2.59% a year ago.
The higher rate landscape is provoking lenders to cut costs, mainly via layoffs. California-based Owning Corp., a direct-to-consumer lender acquired by Guaranteed Rate in February 2021, cut 108 jobs in three rounds from February to April. But it intends to add another 81 to the list.
Guaranteed Rate is just the latest lender to implement layoffs, following others such as Interfirst, Mr. Cooper, Union Home Mortgage, Flagstar, Wells Fargo and Better. Rocket has not laid off workers but has offered a voluntary buyout to some of its staff.
Correction: An earlier version of this story inaccurately described Black Knight’s Optimal Blue OBMMI. The index includes some refinancing data, but excludes information on cash-out refis to avoid skewing averages – as they typically have loan-level price adjustments. Additionally, the OBMMI does not consider data from the Mortgage Bankers Association.