In what could be a preview of what’s in store if mortgage rates continue to rise, demand for purchase loans remains subdued compared to a year ago, as rates on 30-year fixed-rate loans continue to hover above 3 percent.

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Sept. 3, 2021 showed demand for purchase loans was down a seasonally-adjusted 0.2 percent from the week before. Looking back a year, demand for purchase loans was down 18 percent.

Requests to refinance accounted for 66.8 percent of all mortgage applications, even though refinancing applications were also down 3 percent week-over-week and 4 percent from a year ago.

Mike Frantantoni

“Mortgage application volume fell last week to its lowest level since mid-July, as mortgage rates have stayed just above 3 percent for several weeks,” MBA Chief Economist Mike Fratantoni said in a statement. “Refinance volume has been moderating, while purchase volume continues to be lower than expected given the lack of homes on the market.”

Fratantoni said that even though there have been mixed signals about the economy, MBA economists expect further improvements will lead the Federal Reserve to taper its $40 billion in monthly mortgage-backed securities by the end of the year, “which should put some upward pressure on mortgage rates,” he said.

For the week ending Sept. 3, 2021, the MBA reported average rates for the following types of mortgages:

  • For 30-year fixed-rate conforming mortgages (with balances of $548,250 or less), rates averaged 3.03 percent, unchanged from last week’s survey. With points decreasing to 0.33 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate decreased from last week.
  • Rates for 30-year fixed-rate jumbo mortgages (balances greater than $548,250) averaged 3.14 percent, up from 3.13 percent the week before. With points increasing to 0.30 from 0.26, the effective rate also increased from last week.
  • For 30-year fixed-rate FHA mortgages, rates averaged 3.07 percent, down from 3.09 percent the week before. Although points increased to 0.30 from 0.25, the effective rate also decreased from last week.
  • Rates for 15-year fixed-rate mortgages averaged 2.37 percent, down from 2.39 percent a week ago. With points decreasing to 0.26 from 0.30, the effective rate also decreased from last week.
  • For 5/1 adjustable-rate mortgages, rates averaged 2.56 percent, down from 2.80 percent. Although points increased to 0.17 from 0.13, the effective rate also decreased from last week.

Speaking at last month’s economy policy symposium in Jackson Hole, Wyoming, Federal Reserve Chairman Jerome Powell said the Fed won’t commit to tapering its purchases of government bonds and mortgage backed securities while the pandemic’s impact on employment remains uncertain.

On Friday, the Bureau of Labor Statistics reported that employers added only 235,000 jobs in August, compared to an average of 586,000 new jobs added each month so far this year.

But revisions to June and July’s numbers revealed that another 134,000 jobs were created this summer, helping bring the unemployment rate down by 0.2 percentage points in August, to 5.2 percent. Even with the revisions, 8.4 million people were counted as being out of work, compared to 5.7 million before the pandemic.

Fannie Mae’s most recent monthly survey of homebuyer sentiment found most consumers think it’s a good time to sell a home, but a bad time to buy, with high prices and a lack of supply often cited as their rationale.

Email Matt Carter

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