Rising house prices could limit demand for mortgage purchases

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Demand for mortgage purchases fell last week to its lowest level since May 2020, which could be a sign that for the first time home buyers are being squeezed out of the market.

Demand for mortgage purchases fell last week to its lowest level since May 2020, which could be a sign that for the first time home buyers are being squeezed out of the market due to a lack of affordable housing.

A weekly study by the Mortgage Bankers’ Association found that demand for purchase loans for the week ending June 25 was down 5 percent from a seasonally adjusted week earlier and was 17 percent lower than a year ago.

Mike Frantantoni

“The average loan size for all purchase applications has increased, indicating that first-time home buyers who typically get smaller loans are likely to be squeezed out of the market by the lack of entry-level homes to sell,” said MBA chief economist. Mike Fratantoni. said in statement

National house prices rose 14.6% y / y in April, the biggest jump since 2005, according to data latest US National Home Price Index from S & P / Case-Shiller

But Fratantoni said interest rates are also a factor, as refinancing applications are also down 8 percent over the week and 15 percent from last year.

“Last week, mortgage rates were volatile as investors tried to gauge the upcoming Federal Reserve action among several diverging signalsincluding rising inflation, mixed labor market data, high consumer spending and limited supply in the housing market, which has led to a rapid rise in house prices, ”said Fratantoni.

The MBA reported average rates for the following loan types for the week ending June 25:

  • For Mortgage loans with a fixed interest rate for 30 years (loan balance of $ 548,250 or less), rates averaged 3.20 percent, up from 3.18 percent a week earlier. But percentage points were down to 0.39 from 0.48 (including processing fees) for loans with a loan-to-value (LTV) ratio of 80 percent, so the effective rate remained unchanged from last week.
  • Tariffs for 30 year large fixed rate mortgage (loan balances over USD 548,250) averaged 3.23 percent compared to 3.26 percent a week earlier. With a point dropping to 0.33 from 0.44, the effective rate also decreased compared to the previous week.
  • For 30 Year FHA Fixed Rate Mortgage, rates averaged 3.19 percent, up from 3.21 percent a week earlier. Since the pip remained unchanged at 0.34, the effective rate also declined from last week.
  • Tariffs for Mortgage with a fixed interest rate for 15 years an average of 2.56% compared to 2.58% a week earlier. The points are down to 0.37 from 0.39, so the effective rate is also down from last week.
  • For Adjustable Rate Mortgage Loans (ARM) 5/1, rates averaged 2.98 percent, up from 2.69 percent a week earlier. Although the pip dropped to 0.23 from 0.26, the effective rate still increased compared to the previous week.

Email Matt Carter



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