Purchase loan applications rose 1 percent last week despite latest Fed rate hike, but homebuyer demand for mortgages remained close to 2015 lows, according to the Mortgage Bankers Association.

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The latest Fed rate hike doesn’t seem to have deterred homebuyers, with purchase mortgage applications picking up slightly last week for the first time in nearly two months, according to a weekly survey of lenders by the Mortgage Bankers Association.

The MBA’s Weekly Mortgage Applications Survey showed demand for purchase mortgages was up by a seasonally adjusted 1 percent last week when compared to the week before, but down 41 percent from a year ago. Requests to refinance were down 4 percent week over week and 87 percent from a year ago.

Joel Kan

“Purchase applications increased for the first time after six weeks of declines but remained close to 2015 lows, as homebuyers remained sidelined by higher rates and ongoing economic uncertainty,” MBA Deputy Chief Economist Joel Kan said in a statement. “Refinances continued to fall, with the index hitting its lowest level since August 2000.”

Requests to refinance accounted for 28.1 percent of all mortgage applications, down from 28.6 percent the week before, and 12 percent of applications were for adjustable-rate mortgages (ARMs).

A monthly survey of homeowners and renters by Fannie Mae showed homebuyer sentiment fell for the eighth month in a row in October, to the lowest level in records dating to 2011. Thanks to persistently high home prices and unfavorable mortgage rates, only 16 percent of those surveyed said it was a good time to buy a home. The percentage who said it’s a good time to sell also declined by eight percentage points, to 51 percent.

Although Federal Reserve policymakers on Nov. 2 approved the fourth 75-basis point increase in the federal funds overnight rate this year, rates for FHA and 30-year fixed-rate mortgages remain below 2022 highs seen in late October.

Mortgage rates pause

The Optimal Blue Mortgage Market Indices, which are updated daily, show rates on 30-year fixed-rate loans hovering below a 2022 high of 7.16 percent registered on Oct. 24. While rates on FHA loans also hit a high for the year on that date, jumbo mortgages not eligible for purchase by Fannie Mae and Freddie Mac climbed to a new 2022 peak of 7.20 percent on Friday, Nov. 4.

During the week ending Nov. 4, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $647,200 or less), rates averaged 7.14 percent, up from 7.06 percent the week before. With points increasing to 0.77 from 0.73 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased to 7.36 percent.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 6.50 percent, down from 6.55 percent the week before. Although points increased to 0.78 from 0.70 (including the origination fee) for 80 percent LTV loans., the effective rate also decreased to 6.72 percent.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.86 percent, up from 6.70 percent the week before. With points increasing to 1.37 from 1.18 (including the origination fee), the effective rate also increased to 7.26 percent.
  • Rates for 15-year fixed-rate mortgages averaged 6.40 percent, up from 6.37 percent the week before. With points increasing to 1.13 from 1.05 (including the origination fee) for 80 percent LTV loans, the effective rate also increased to 6.68 percent.
  • For 5/1 ARMs, rates averaged 5.87 percent, up from 5.79 percent the week before. With points increasing to 0.92 from 0.90 (including the origination fee) for 80 percent LTV loans, the effective rate also increased to 6.21 percent.

The Fed has raised the short-term federal funds rate six times this year, bringing the benchmark rate to a target range of 3.75 to 4 percent. In September, Fed policymakers projected that they’ll need to raise the federal funds rate to 4.6 percent by the end of next year to tame inflation.

Last week Fed Chair Jerome Powell said that while policymakers may make smaller adjustments to the benchmark short-term interest rate in the future, the federal funds rate may need to go higher, and stay high longer, than projected in September.

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Email Matt Carter

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