As mortgage rates continue to retreat from 2022 highs, all eyes will be on the Federal Reserve as policymakers conduct their final meeting of the year next week.

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Demand for purchase mortgages fell last week even as rates continued to retreat from 2022 highs, breaking a streak of four consecutive weeks of stronger homebuyer demand, according to a weekly survey by the Mortgage Bankers Association.

The MBA Weekly Mortgage Applications Survey showed demand for purchase loans was down a seasonally adjusted 3 percent last week compared to the week before, and 40 percent from a year ago. Applications to refinance were up 5 percent week over week but down 86 percent from a year ago.

Joel Kan

“Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” said MBA Deputy Chief Economist Joel Kan, in a statement. “The average loan size for purchase applications decreased to $387,300 – its lowest level since January 2021. The decrease was consistent with slightly stronger government applications and a rapidly cooling home-price environment.”

Requests for FHA loans accounted for 13.7 percent of all mortgage applications, up from 12.2 percent the week before. At 11.4 percent, the VA share of total applications was also up slightly from 11.2 percent the week before. Requests for USDA loans accounted for 0.6 percent of loan applications, up from 0.5 percent the week prior.

Mortgage rates retreat from 2022 highs


The Optimal Blue Mortgage Market Indices, which are updated daily, show that since hitting a 2022 high of 7.16 percent on Oct. 24, 30-year fixed-rate mortgages have fallen into the low sixes, to levels not seen since September.

For the week ending Dec. 2, 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 6.41 percent, down from 6.49 percent the week before. With points decreasing to 0.63 from 0.68 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate decreased to 6.60 percent.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 6.08 percent, down from 6.35 percent the week before. With points decreasing to 0.5 from 0.61 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 6.23 percent.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.39 percent, down from 6.57 percent the week before. With points decreasing to 0.93 from 1.14 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 6.66 percent.
  • Rates for 15-year fixed-rate mortgages averaged 5.84 percent, down from 6.02 percent the week before. With points decreasing to 0.55 from 0.69 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 5.98 percent.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.59 percent, up from 5.48 percent the week before. With points increasing to 0.91 from 0.89 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 5.93 percent.

All eyes will be on Federal Reserve policymakers next week, as they wrap up their final meeting of the year on Dec. 14.

At each of its last four meetings, the Fed raised the short-term federal funds rate by 75 basis points in an attempt to cool inflation. With some key indicators suggesting inflation is beginning to ease, Fed policymakers are expected to slow, but not halt, the pace of short-term rate hikes.

The CME FedWatch Tool, which monitors futures contracts to calculate the probability of Fed rate hikes, shows traders pricing in a 78 percent chance of a smaller, 50-basis point increase in the federal funds rate next week.

But this year’s dramatic rise in mortgage rates and nervous consumers have set up the housing market for its “slowest fourth quarter in a decade,” according to NAR Chief Economist Lawrence Yun, with October pending home sales down 37 percent from a year ago. Would-be sellers pulled homes off the market at a record pace in November, according to data compiled by Redfin.

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Email Matt Carter

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