MortgageMortgage Rates

Mortgage rates steady at 5% as housing supply increases

While the potential homebuyer pool has shrunk, supply is increasing

Purchase mortgage rates this week averaged 5.09%, essentially flat from the prior week, according to the latest Freddie Mac PMMS.

A year ago at this time, 30-year fixed rate purchase rates were at 2.99%. The government-sponsored enterprise index accounts solely for purchase mortgages reported by lenders during the past three days.

“Mortgage rates continued to inch downward this week but are still significantly higher than last year, affecting affordability and purchase demand,” said Sam Khater, Freddie Mac’s chief economist. “Heading into the summer, the potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing. This is welcome news following unprecedented market tightness over the last couple years.”

The purchase index has now fallen for three consecutive weeks.

Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming mortgage rate at 5.42% Wednesday, up from 5.32% the previous week. 

The 30-year fixed-rate jumbo was at 4.97% Wednesday, also up from 4.90% the week prior, according to the Black Knight index. 

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This week, mortgage application volume dropped 2.3% from the past week to a four-year low: refi applications declined 5% and purchase apps decreased 1%, according to the MBA. The MBA found the adjustable-rate mortgage share dipped to 8.7% of total applications.

Mortgage rates are following the Federal Reserve’s (Fed) inflation-fighting monetary policy. Minutes from the Fed’s meeting earlier this month released Wednesday showed policymakers emphasized the need to quickly raise interest rates to bring consumer prices closer to the Fed’s 2% goal. 

The central bank raised the interest rate by a half percentage point on May 4 and unveiled a plan to reduce its $9 trillion asset portfolio. The Fed also has repeatedly signaled it will continue to raise rates in 2022 and into 2023.

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.32% with an average of 0.8 point, up from last week’s 4.31%. The 15-year fixed-rate mortgage averaged 2.27% this time last year.

The 5-year ARM averaged 4.04%, with buyers on average paying for 0.3 point, up from 4.20% the week prior. The product averaged 2.64% a year ago. 

Economists forecast the tightening monetary policy will reduce origination volume significantly in 2022 and 2023. The MBA expects loan origination volume to drop more than 35% to about $2.5 trillion this year, from last year’s $4 trillion. Meanwhile, the MBA expects 5.93 million home sales in 2022, compared to 6.12 million in 2021.

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