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 are showing resilience, but higher rates expected in coming months may reduce their 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 GSE’s 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 pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association (MBA), measured the 30-year conforming mortgage rate at 5.51% on Wednesday, up from 5.52% in the previous Wednesday. Meanwhile, the 30-year fixed-rate jumbo was at 5.00% on Wednesday, down from 5.04% in the previous week.
So far, according to Khater, homebuyers continue to show resilience. “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 that 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 on May 4 and announced a plan to reduce the $9 trillion asset portfolio that ballooned since the pandemic. The central bank had 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 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 intends to add 81 to the list.
Guaranteed Rate is just the latest lender to face 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.