It’s a slow time of year for homebuying, so it’s not surprising to Mortgage Bankers Association Chief Economist Mike Fratantoni that purchase applications didn’t jump last week.

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Mortgage rates continued to retreat from 2022 highs last week, but lower rates had little impact on homebuyer demand with the holidays approaching, according to a weekly survey of lenders by the Mortgage Bankers Association released Wednesday.

Although applications for refinancing were up 6 percent last week when compared to the week before, refi demand was down 85 percent from a year ago.

Demand for purchase loans was essentially unchanged, decreasing by a seasonally adjusted 0.1 percent from the week before. Looking back to the same time a year ago, requests for purchase loans were down 36 percent.

Even though the Federal Reserve raised short-term interest rates by 50 basis points last week, rates for all types of mortgage loans tracked by the MBA Weekly Mortgage Application Survey were down, with bond market investors anticipating that the Fed is close to pausing its rate hike campaign.

At 6.34 percent, rates for 30-year fixed-rate conforming loans eligible for purchase by Fannie Mae and Freddie Mac hit their lowest level since September, MBA Chief Economist Mike Fratantoni said.

Mike Fratantoni

“Refinance application volume increased slightly in response but was still about 85 percent below year-ago levels,” Fratantoni said in a statement. “This is a particularly slow time of year for homebuying, so it is not surprising that purchase applications did not move much in response to lower mortgage rates.”

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 tumbled, staying below 6.4 percent for most of December.

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 by 86 basis points, dipping to 6.3 percent Tuesday.

For the week ending Dec. 16, 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 6.34 percent, down from 6.42 percent the week before. With points decreasing to 0.59 from 0.64 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate decreased from last week, to 6.51 percent.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 5.97 percent, down from 6.14 percent the week before. Although points increased to 0.53 from 0.42 (including the origination fee) for 80 percent LTV loans, the effective rate decreased from last week, to 6.12 percent.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.35 percent, down from 6.40 percent the week before. With points decreasing to 0.99 from 1.03 (including the origination fee) for 80 percent LTV loans, the effective rate decreased from last week, to 6.63 percent.
  • Rates for 15-year fixed-rate mortgages, popular with homeowners who are refinancing, averaged 5.81 percent, down from 5.92 percent the week before. With points decreasing to 0.53 from 0.54 (including the origination fee) for 80 percent LTV loans, the effective rate decreased from last week, to 5.94 percent.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.43 percent, down from 5.58 percent the week before. Although points increased to 0.95 from 0.80 (including the origination fee) for 80 percent LTV loans, the effective rate decreased from last week, to 5.78 percent.

In forecasts released Monday, economists at the Mortgage Bankers Association and Fannie Mae said they expect mortgage rates will continue to decline next year.

Mortgage rates expected to fall


Source: Fannie Mae December 2022 housing forecast, MBA housing forecast.

Fannie Mae forecasters believe rates on 30-year fixed-rate loans peaked at 6.6 percent during the fourth quarter of 2022 and could dip below 6 percent by the first quarter of next year. MBA economists projectrates will fall below 6 percent by the second quarter of 2023, and below 5 percent rate in the second quarter of 2024.

The improved outlook for mortgage rates could bode well for home sales, with Fannie Mae economists issuing a modest increase to their 2023 home sales forecast. Economists at the mortgage giant now expect 4.57 million home sales next year, up from 4.42 million sales forecast in November.

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Email Matt Carter

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