A sign advertising home mortgage services at a Bank of America branch in Manhattan Beach, California.
Patrick T Fallon | Bloomberg | Getty Images
The country’s mortgage bankers are reducing their expectations for the year as rapidly rising interest rates make it even more expensive to buy a home.
The Mortgage Bankers Association now calls for total mortgage origination, including refinancing loans, to total $2.58 trillion in 2022, down 35.5% from 2021. The previous forecast was $2.61 trillion.
The MBA’s forecast, which represents more than 2,000 companies in the industry, reflects the conflicting realities of the US economy. The supply on the housing market is scarce and prices are high. Americans are grappling with the hottest inflation in four decades as the Federal Reserve aggressively raises interest rates to keep them under control.
With rising interest rates, the demand for refinancing has fallen sharply recently. Applications to refinance a home loan fell a seasonally adjusted 5% last week and were 62% lower than a year ago, the MBA said. For the full year, the Group expects a 64% decline in refinancing. The refinancing share of mortgage activity fell last week to 37.1% of all applications from 38.8% the previous week.
Procurements for purchases are still forecast to rise to a record $1.72 trillion this year, but the previous forecast was $1.77 trillion.
“Although existing sales volume will be slightly lower than last year, continued growth in new home sales and rapid rise in home prices should result in slower but solid 4% annual growth in originating volume,” said Michael Fratantoni, Chief Economist of the MBA.
The average contract rate for 30-year fixed-rate mortgages with a 20% down payment and a corresponding loan balance of $647,200 or less increased from 4.90% to 5.13%, according to the MBA. In the same week a year ago, the rate was 3.27%.
Points went from 0.53 to 0.63 including origination fees.
“Mortgage rates across all loan types continued to rise, with the 30-year fixed rate surpassing 5% — the highest level since November 2018. Funding activity consequently declined to the slowest weekly pace since 2019,” Joel Kan said. an MBA economist.
Mortgage applications to buy a home rose 1% on the week but were 6% lower than the same week a year ago. More potential buyers are now turning to adjustable rate mortgages, which have lower interest rates. Their share of applications was 7.4% last week, the highest since June 2019.
“Both conventional and government purchase applications increased in a promising sign of strong purchasing demand amid affordability issues,” Kan said.