US Mortgage Applications Rise Over 10% in Two Weeks Ahead of More Federal Reserve Rate Rises

The Mortgage Bankers Association showed mortgage applications in the US w.e. 17 June rose another 4.2% after rising 6.6% the prior week. Buyers appear to be trying to get in ahead of more Fed rate rises. The average long-term mortgage rate climbs by another 33 bps to its highest since November 2008. Refinancing activity dropped as those locked in are content to hold off. The Federal Reserve raised rates 75bps a week ago. The 30-year mortgage rate has been rising with yields with higher house prices in general.

mortgage applicaition

Mortgage Bankers Association for the week ending 17 June 2022

  • US MBA mortgage applications w.e. 17 June +4.2% vs Prior +6.6%
  • Market index 320.4 vs 307.4 prior
  • Purchase index 242.8 vs 225.0 prior
  • Refinancing index 712.7 vs 735.5 prior
  • 30-year mortgage rate 5.98% vs 5.65% prior
US MBA Mortgage Applications

This year’s surge in mortgage rates was hardly unforeseen, given the record lows reached in the pandemic period and concerns about high U.S. inflation readings, but it has unfolded faster than many expected. At the beginning of the year, the average rate on America’s most popular home loan was 3.22%. 

Higher mortgage rates typically slow home-buying activity, but the number of applications. Expectations that the Federal Reserve will raise interest rates several more times this year to control inflation are driving up mortgage rates. Home prices continue to push homeownership out of the question for many Americans.

Things are different to the 2008 bubble pop however, total mortgage debt in the United States is now less than 43% of current home values, the lowest on record. Negative equity is virtually nonexistent, compare that to the more than 1 in 4 borrowers who were under water in 2011. Just 2.5% of borrowers have less than 10% equity in their homes.

ARMS

There are currently 2.5 million adjustable-rate mortgages, or ARMs, outstanding today, or about 8% of active mortgages. That is the lowest volume on record. ARMs can be fixed, usually for terms of five, seven or 10 years.

In 2007, just before the housing market crash, there were 13.1 million ARMs, representing 36% of all mortgages.

Rising rates are reducing home-loan refinancings, which powered much of the mortgage market’s boom in 2020 and 2021. About four million Refinancings were expected to make up 33% of mortgage originations this year, down from 59% in 2021, according to the Mortgage Bankers Association.


source: Mortgage Bankers Association of America

From The TradersCommunity News Desk