Home Trade association Mortgage rates hit new high as loan applications slide – Forbes Advisor

Mortgage rates hit new high as loan applications slide – Forbes Advisor

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Mortgage rates rebounded more than 7% to the same record high set in late October, keeping borrowers on the sidelines amid continued market swings and recession fears.

The average 30-year fixed-rate mortgage rose to 7.08% for the week ending November 10, according to Freddie Mac. Mortgage rates jumped 13 basis points from last week’s average of 6.95% (one basis point equals one-hundredth of a percentage point), and have more than doubled since early January , when the 30-year average fixed rate was 3.22%.

The 15-year fixed-rate mortgage averaged 6.38% this week, down from 6.29% last week and down from 2.27% a year ago.

The average 5/1 variable rate mortgage (ARM) was 6.06%, down from 5.95% last week and 2.53% a year ago. As borrowing costs continue to rise, ARMs remain more attractive as they now have a lower rate than fixed rate mortgages.

According to the Mortgage Bankers Association (MBA), ARM applications accounted for 12% of all mortgage applications in the week ending Nov. 4, a slight increase from 11.8% the previous week. ARMs accounted for just 3% of all mortgage applications in January 2022.

The above rates do not include fees called “points” or other costs associated with obtaining home loans.

Related: Compare current mortgage rates

Mortgage rate forecasts to 2023

Mortgage rates have hit extreme highs and lows this year, with the 30-year fixed rate dropping to 4.99% on August 4, then hitting its first 20-year high at 7.08% in October. The rise in rates is due, in part, to the Federal Reserveaggressive strategy to increase its federal funds rate six times this year in an effort to curb inflation.

Moreover, while the government’s latest reading on inflation indicated that consumer prices rose less than expected in October – plunging below an 8% annual rate for the first time since February – the country is still grappling with near-record inflation.

The Fed has signaled that its monetary tightening policy will likely continue, which will have an indirect impact on mortgage rates. Long-term mortgage rates are directly linked to Treasury bill yields, which react to the Fed actions and monetary policy.

Following the central bank’s policy meeting in November, Fed Chairman Jerome Powell “made it clear that the data suggests there is still a long way to go, and noted that the December projections will likely show a higher-than-expected Fed Funds rate trajectory in September,” said Danielle Hale. , chief economist at Realtor.com, in a statement.

Most housing experts say mortgage rates will average 5-6% in 2023, although some have predicted rates will go even higher.

Related: Mortgage rate forecasts for 2022

First-time home buyers face affordability shortage

Homebuyers have continued to react to high mortgage rates in recent months by forgoing mortgage applications. Although the overall volume of mortgage applications declined in the most recent week, home purchase loan applications edged up 0.1%. Although it remained relatively stable, the small increase broke a series of lows, according to the MBA.

“Buy orders rose for the first time after six weeks of declines, but remained near 2015 lows as homebuyers stayed away from higher rates and continued economic uncertainty” said Joel Kan, the MBA’s vice president and deputy chief economist, in a statement.

As mortgage rates remained high, refinances also continued to fall, falling to levels not seen since August 2000, Kan said.

In addition to high mortgage rates, first-time home buyers also face a low housing supply that is about half the level needed for what is considered a balanced market. The share of homebuyers who are newcomers has dropped to 26%, according to the National Association of Realtors (NAR). This is the lowest share since the real estate trade association began tracking.

The age of first-time buyers has also taken a new step. Data from NAR shows the average first-time home buyer has reached the oldest age on record at 36, three years older than buyers just a year ago.

“First-time buyers are older because they have saved for down payments for longer periods or rely on a generational transfer of wealth to propel them into homeownership,” says Jessica Lautz, vice president of demographics. and behavioral information from NAR, in a press release.

Where is the housing market heading in 2023?

Various indicators suggest that the housing market, which has reached record property prices earlier this year, begins to cool. However, affordability remains out of reach for many homebuyers due to stubbornly high rates and home prices in many markets, even as home prices begin to decline.

The latest government consumer price index shows housing costs rose 0.8% from September to October, the biggest monthly increase since August 1990. The housing index saw a 6.9% increase % year over year.

“The housing market is the most interest rate sensitive segment of the economy, and the impact of rates on homebuyers continues to evolve,” said Sam Khater, chief economist at Freddie Mac. “Home sales are down significantly and as we approach the end of the year, they are not expected to improve.”

Still, if you know you want to live in a home for the long term, Ward Morrison, president and CEO of Motto Franchising, the Denver-based company behind Motto Mortgage, points out that the longer you wait to buy, the less chance you have. opportunity to build equity in your home.

“Prices are already highly negotiable, why wait to start building wealth? Morrisson said. “Even if a first home doesn’t tick all the boxes, within five to 10 years there’s a good chance a homeowner will have built up enough equity to benefit from buying a better home. “

Related: Best mortgage lenders of November 2022