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Mortgage rates may fall slightly by the end of the year, but don’t expect record lows anytime soon.

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The Federal Reserve has been working to tame inflation for nearly 18 months now, approving 11 hikes to its benchmark interest rate since March 2022. Those moves — along with other economic factors — have pushed mortgage rates up considerably in that time. In fact, since last March, the average rate on 30-year mortgage loans has jumped from under 4% to 7.23% today, according to Freddie Mac. Mortgage interest rates are currently the highest they have been since 2000. 

That’s a far cry from the sub-3% rates the market saw in 2020 and 2021 — and a significant barrier for many hopeful homebuyers.

Fortunately, mortgage rates fluctuate constantly, so they won’t stay that high forever. Just how long could those elevated rates stick around? And when can consumers expect lower rates once again? We asked a few experts for their opinion. 

Explore your mortgage rate options here now to see what you qualify for.

Where are mortgage interest rates headed?

There’s no way to tell for sure, but most experts and industry groups think rates are at or near their peak. As Matt Clarke, chief operating officer of Churchill Mortgage, puts it, “We’re approaching a glass ceiling where rates going too much higher would be detrimental to other critical aspects of the economy.” 

Still, rates being at their peak doesn’t necessarily mean they’ll decrease. For that to happen, inflation would need to slow, investments into mortgage-backed securities would need to increase and the Federal Reserve would need to ease up on its rate hikes.

According to the CME Group’s Fed Watch tool, there’s only about an 18% chance the Fed increases its rate at its upcoming September meeting. For its November meeting, the chances are higher (though that’s still a way out and a lot could change before then). 

“Inflation needs to slow, and unemployment needs to start creeping up,” says Jerry Schiano, CEO at home equity lender Spring EQ. “I think unemployment will start increasing before year-end. Consumers are stressed, and that could lead to less buying and pullback by companies.”

If this happens, the Fed could ease up on its benchmark rate hikes and mortgage rates may decrease as well. 

Explore your mortgage purchase and refinance rate options here to learn more.

When will mortgage interest rates drop?

Realtor.com, Fannie Mae, the National Association of Realtors, and the Mortgage Bankers Association all expect mortgage rates to be slightly lower by the end of the year, with predictions ranging from 6% to 6.7% on average.

That’s a drop — but not anything significant. For reference, a 7.23% rate (today’s average) on a 30-year $400,000 loan comes with about a $2,723 monthly payment. At 6.7%, it falls to $2,581 — just a $142 difference.

“I expect mortgage rates to stay elevated through most of 2024,” says John Paasonen, co-founder and CEO of Maxwell, a mortgage technology provider.

More notable dips in rates are probably much further down the line — possibly by 2025, Clarke says.

“I think significantly lower rates — back to the 5% range — could realistically happen in 2025, with 2024 beginning a slow trend downward,” Clarke says.

Note that he says 5% — not the 2 to 3% rates we saw a few years ago. According to all three experts, those record-low numbers aren’t returning any time soon (and they may never). 

“Let’s just say I’m glad I locked into a 2.6% mortgage rate on my own home,” Paasonen says. “The market will restabilize at a new norm, likely within the next 12 to 18 months. That new norm most certainly will not be below 3% — that was a unique attribute of the amount of economic stimulation following a global pandemic.”

Getting a mortgage in the meantime

Until that new norm is achieved, taking out a mortgage is going to be more expensive than it has been in years past. You also may want to think carefully about selling your home if you’re one of the many who took advantage of those ultra-low mortgage rates.

“Anybody who took record low rates made a great decision,” Schiano says. “They are saving a lot of money each month and should think carefully before refinancing or even selling their house.”

If buying a new home is necessary, though, there are strategies for getting a lower mortgage interest rate. You can buy points, negotiate a temporary buydown, or consider a lower-rate mortgage product, like a 15-year loan or adjustable-rate mortgage. VA loans and USDA loans also tend to have lower rates than other mortgage options (if you can qualify for them). 

Explore your mortgage options here now.

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Source: cbsnews.com

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Brexit, the British decision to leave the European Union, is the latest unexpected event that’s driving down mortgage interest rates as investors flee Great Britain and European markets for the safety of US Treasury bonds and mortgage-backed securities. Europe’s dilemma is a boon for American homeowners as the uncertainty in Europe took raising rates off the Federal Reserve’s agenda for the next quarter.

Once again, rates are approaching near record lows, creating new opportunities for homeowners to refinance.

How homeowners have reacted to rate drops

Following the drop in rates, the volume of new applications surged 14.2 percent in the week ending July 1 and another 7.2 in the week ending July 8, compared with the prior weeks, according to the Mortgage Bankers Association. Refinances accounted for 64 percent of mortgage application activity in the recent week, up from 58.1% two weeks earlier.

Many of the new refinancers have already refinanced recently. These “serial refinancers” are willing to pay the origination and closing costs involved getting a lower rate. A recent study by Black Knight Financial Services found that serial refinancers played a significant role in the rise and fall of refinancing volumes throughout 2015 driven by interest rate fluctuations.

According to the report, refinances from borrowers who’ve had their prior mortgage for less than two years rose by 800 percent from the first quarter of 2014 to the first quarter 2015 as interest rates dropped. Of these borrowers, two-thirds of these refinances in the fourth quarter were from borrowers who had their mortgage from less than four years.

During the housing peak from 2005 to 2006 nearly all refinance volume was coming from borrowers who held their prior mortgage for less than four years, Black Knight reported.

“Term reductions remain popular among borrowers taking advantage of low rates; not surprisingly they are more popular among more aged loans, as borrowers do not want to restart the clock on their mortgage,” the report said.

However, serial refinancing can be a losing proposition.

What does that mean for you?

“If your time horizon is not long enough, you are not going to be able to recoup the cost of refinancing,” said Greg McBride, senior financial analyst for Bankrate.com.

Even those who roll closing costs into the new loan can end up on the short end of the stick. McBride says consumers who continually raid the piggy bank to pay for such costs should think twice before opting for another refinance since they are increasing their balance with each refinances as opposed to knocking it down.

Source: totalmortgage.com

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With mortgage rates near 20-year highs and relatively few homes listed for sale, the Atlanta-area housing market in August reached something of a precarious — and possibly temporary — plateau with prices rising, but slowly.

The median price of a home sold last month was $404,000, according to data released this week by the Georgia Multiple Listing Service.

That was just 1% higher than in July and only 2.3% above the median price of a home sold a year earlier, compared to double-digit increases for previous years, said John Ryan, chief marketing officer of the Georgia MLS.

The dampener on price hikes has been mortgage rates, pushed higher by the Federal Reserve’s campaign to tame inflation by raising borrowing costs.

When that changes, the market will see a flood of buying, predicted broker Kristen Jones, owner of Re/Max Around Atlanta. “Eventually, the Fed will stop, and mortgage rates will come down. At that point, we expect the floodgates to open.”

But right now, those gates are high and they’re holding.

The average rate for a 30-year mortgage was 7.18% at the end of August, the highest it has been since March 2002, according to the Federal Home Loan Mortgage Corp., which insures loans in secondary markets.

Many who do buy now are betting that can’t continue, Jones said. “Buyers crossing their fingers that they can refinance in the next few years.”

Higher rates not only make monthly payments dramatically higher for new buyers, they freeze many potential sellers who don’t want to trade their current low rates for a high rate if they move, Jones said. “Sellers are not motivated to list. About 61% of all outstanding mortgages have an interest rate below 4%.”

With so many potential sellers standing pat, inventory — that is, the number of homes listed for sale — was 12.1% lower in August than it was a year earlier, according to the Georgia MLS.

Fewer than 11,000 homes in the region were listed for sale, which represents barely two months of sales. In a healthy, balanced market, the inventory level should represent at least six months of sales.

Part of the problem is an overall housing shortage in metro Atlanta.

After years of exuberant overbuilding, construction came to a virtual halt during the 2007-09 recession and has never regained its previous pace despite the region’s population growth. Since 2012, the shortage — and the flow of millennials into the market — has kept home prices rising, which increasingly made affordability an issue.

Then came the pandemic, which roiled expectations about commuting and home offices, and spurred federal efforts to protect household finances by driving interest rates down to historic lows and pumping money into the economy.

The rebound from the pandemic has meant rapid job growth, along with higher pay for many.

But at least until recently, Atlanta home price gains far outpaced income growth. That made down-payments for homes a challenge, shoving many potential buyers out of the market.

Demand for housing has spurred construction, most of it well outside the city of Atlanta. Even so, high land prices and various zoning restrictions have made construction for first-time buyers rare.

In Alpharetta, Blue River Lifestyle Communities this week announced a 24-unit development that includes both townhomes and single-family houses. The homes will be listed at $1.3 million or more.

Nearly 80% of baby boomers own a home, but only about half of the nation’s millennials do, according to national brokerage Redfin. About 1 of every 5 millennials say they don’t think they’ll ever be able to afford one, according to a Redfin poll.

But at least renters have also seen a moderation in the market. Metro Atlanta’s median rent is $2,127 a month, according to Rent.com, which tracks rentals nationally. That is virtually unchanged from a year ago, the group said.

And rate hikes are also biting homeowners who stay put.

The Fed’s campaign ripples through to virtually all borrowing, from car loans to credit cards. So even homeowners with low-rate mortgages will pay more than before if they want to tap their mortgage for a loan, said Andy Walden, vice president of research at Black Knight, a real estate analysis firm recently purchased by Atlanta-based Intercontinental Exchange.

Nationally, mortgage holders withdrew $39 billion in equity from their homes in the second quarter of this year, which is only about half as much as before interest rates started to climb, he said. “Rising rates are having a clear impact on how — and how much — equity mortgage holders are willing to withdraw from their homes.”

Metro Atlanta housing market, August

Median sales price: $404,000

Number of sales: 5,299

Number of homes listed for sale: 10,927

Price compared to year earlier: up 2.3%

Sales compared to year earlier: down 15.8%

Price compared to January 2020: up 50%

Average rate, 30-year, fixed-rate mortgage

Aug. 31, 2023: 7.18%

Aug. 31, 2022: 5.66%

Aug. 31, 2021: 2.87%

Aug. 31, 2020: 2.91%

High since 1999: 8.64% (May 2000)

Last time above 7%: March 29, 2002

Source: Georgia Multiple Listing Service, S&P Case Shiller Index, Federal Home Loan Mortgage Corp.

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Source: ajc.com

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Mortgage rates were mixed this week, according to data compiled by Bankrate. See below for a breakdown of how each loan term moved.

After increasing interest rates at 10 consecutive meetings in 2022 and 2023, the Federal Reserve finally paused at its June 14 meeting — only to resume July 26, with a quarter-point increase.

Official inflation has fallen to 3 percent, near the Fed’s official goal of 2 percent, and housing economists say the end is near for the central bank’s intense fight against inflation.

“We do expect mortgage rates to trend down once the [Federal Open Market Committee] clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association.

Rates accurate as of September 6, 2023.

The rates listed here are marketplace averages based on the assumptions indicated here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, September 6th, 2023 at 7:30 a.m.

>>Check out historical mortgage interest rate trends

You can save thousands of dollars over the life of your mortgage by getting multiple offers. Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022, according to research by mortgage giant Freddie Mac. It found the payoff for bargain-huntng borrowers doubled last year.

“All too often, some homeowners take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

Mortgage rates for home purchase

30-year mortgage moves upward, +0.06%

The average rate for the benchmark 30-year fixed mortgage is 7.59 percent, an increase of 6 basis points from a week ago. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 7.40 percent.

At the current average rate, you’ll pay principal and interest of $705.39 for every $100k you borrow. That’s an increase of $4.12 over what you would have paid last week.

When to consider a 30-year fixed mortgage

Choosing the right home loan is an important step in the homebuying process, and you have a lot of options. You need to take several factors into consideration, including your credit score, income, down payment amount, budget, and financial goals.

15-year mortgage rate moves lower,-0.02%

The average 15-year fixed-mortgage rate is 6.79 percent, down 2 basis points from a week ago.

Monthly payments on a 15-year fixed mortgage at that rate will cost $887 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM rate retreats, -0.01%

The average rate on a 5/1 ARM is 6.54 percent, ticking down 1 basis point since the same time last week.

Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate can change periodically throughout the life of the loan, unlike fixed-rate loans. These types of loans are best for people who expect to sell or refinance before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.54 percent would cost about $635 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Jumbo mortgage moves up, +0.10%

Today’s average rate for jumbo mortgages is 7.63 percent, up 10 basis points over the last week. This time a month ago, the average rate on a jumbo mortgage was below that, at 7.43 percent.

At the current average rate, you’ll pay $708.14 per month in principal and interest for every $100,000 you borrow. That’s an extra $6.87 compared with last week.

Rate review: How mortgage rates have shifted over the past week

  • 30-year fixed mortgage rate: 7.59%, up from 7.53% last week, +0.06
  • 15-year fixed mortgage rate: 6.79%, down from 6.81% last week, -0.02
  • 5/1 ARM mortgage rate: 6.54%, down from 6.55% last week, -0.01
  • Jumbo mortgage rate: 7.63%, up from 7.53% last week, +0.10

Interested in refinancing? See mortgage refinance rates

30-year mortgage refinance moves higher, +0.09%

The average 30-year fixed-refinance rate is 7.75 percent, up 9 basis points compared with a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.46 percent.

At the current average rate, you’ll pay $716.41 per month in principal and interest for every $100,000 you borrow. That’s an additional $6.21 per $100,000 compared with last week.

Where are mortgage rates headed?

The days of sub-3 percent mortgage interest on the 30-year fixed are behind us, and rates have so far risen beyond 7 percent in 2022.

“Low interest rates were the medicine for economic recovery following the financial crisis, but it was a slow recovery so rates never went up very far,” says McBride. “The rebound in the economy, and especially inflation, in the late pandemic stages has been very pronounced, and we now have a backdrop of mortgage rates rising at the fastest pace in decades.”

Comparing different mortgage terms

The 30-year fixed-rate mortgage is the most popular option for homeowners, and this type of loan has a number of advantages, including:

  • Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower payments spread over time.
  • Stability: With a 30-year mortgage, you lock in a consistent principal and interest payment. Because of the predictability, you can plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance and property taxes go up or, less likely, down.
  • Buying power: With lower payments, you can qualify for a larger loan amount and a more expensive home.
  • Flexibility: Lower monthly payments can free up some of your monthly budget for other goals, like saving for emergencies, retirement, college tuition or home repairs and maintenance.
  • Strategic use of debt: Some argue that Americans focus too much on paying down their mortgages rather than adding to their retirement accounts. A 30-year fixed mortgage with a smaller monthly payment can allow you to save more for retirement.

That said, shorter-term loans have gained popularity as rates have been historically low. Although they have higher monthly payments compared to 30-year mortgages, there are some big benefits if you can afford the upfront costs. Shorter-term loans can help you achieve:

  • Greatly reduced interest costs: Because you pay off the loan faster, you’ll be able to pay less interest overall.
  • Lower interest rate: On top of less time for that interest to compound, most lenders price shorter-term mortgages with lower rates.
  • Build equity faster: The faster you pay off your mortgage, the faster you’ll own value in your home outright. That’s especially handy if you want to borrow against your property to fund other spending.
  • Debt-free sooner: A shorter-term mortgage means you’ll own your house free and clear sooner than you would with a longer-term loan.

What comes next:

Featured lenders for today, September 6, 2023

Source: bankrate.com

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Colorado Springs-area home sales fell again last month and prices remained flat as the local housing market continued to feel the effects of spiking mortgage rates.

According to a new Pikes Peak Association of Realtors market trends report that examined home sales last month that took place mostly in the Springs and surrounding El Paso County:

• Single-family home sales totaled 1,067 in August, a nearly 22% decline from the same month last year and the 15th consecutive month that local sales have fallen on a year-over-year basis.

• Homes spent an average of 29 days on the market in August before they sold, an increase from 17 days during the same month last year.

• The median price, or midpoint, of homes that sold in August was $480,000, a 0.1% drop from $480,592 in August 2022. Home prices had increased each month from December 2014 to November 2022, but began to slide late last year and now have declined on a year-over-year basis in eight out of the last nine months.  

• The supply of homes listed for sale totaled 2,420 in August, down 8.3% from the same month last year. On the one hand, August’s listings were the most for any month since November, yet they remained far below pre-Great Recession years, when August inventories often topped 3,000 and 4,000.

The Springs-area housing market, like that of many other cities, has done an about-face since the second half of last year because of higher long-term mortgage rates.

For years, historically low rates in the neighborhood of 3% for a 30-year, fixed-rate loan helped spur a furious demand for single-family homes. That demand, coupled with a shortage of properties for sale, sent Springs-area median home prices soaring over several years; in June 2022, they hit a record high of $495,000.

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After the Federal Reserve began to hike interest rates last year to tamp down surging inflation, mortgage rates rose, too, and roughly doubled to more than 6% for 30-year loans by the end of last year.

That trend of high rates continued through the first several months of this year. In mid-August, long-term mortgages topped 7%; last week, the national average for a 30-year, fixed rate mortgage was 7.18%, according to mortgage buyer Freddie Mac.

Higher rates have priced many homebuyers out of the market and sent sales plunging.

Local real estate agents, however, have said that the demand for homes remains relatively strong. As a result, and combined with tight inventories, prices haven’t plunged, though they are down from their record highs.   

The new home side of the Springs-area housing market also has felt the effects of higher mortgage rates.  

In August, 127 permits were issued for the construction of single-family, detached homes, according to a new Pikes Peak Regional Building Department report. August’s tally was up 15.5% compared with the same month last year.

But the pace of home construction through the first eight months of this year remains well behind the same period in 2022, Regional Building Department figures show. Through August of this year, single-family detached permits totaled 1,655, down 36.4% from 2,604 on a year-over-year basis.

Source: gazette.com

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Will US mortgage rates remain above 7 per cent?

If the average cost of a new US home loan holds above 7 per cent for a fifth week, it will be equal to the most painful run for homeowners since January 2002.

Mortgage rates have doubled since the Federal Reserve began tightening monetary policy 18 months ago, but rising borrowing costs have not had the expected effect of cooling house prices — a factor that would have made house moves more affordable. 

Because most US homeowners hold 30-year fixed-rate loans, they have in effect been trapped in their properties because they cannot afford to switch from their existing low rates. Roughly three-quarters are paying less than 4 per cent, JPMorgan estimated recently. 

Mortgage costs are being watched closely by investors who have enjoyed gains of more than a third by backing leading homebuilders this year. That market has benefited from higher demand for new houses because of the limited supply of existing ones. 

The latest data from the Mortgage Bankers Association, covering the week to September 1, is due on Wednesday. Rates stood at 7.31 per cent in the week to August 25, and should have eased slightly as Treasuries rallied, pushing yields on benchmark 10-year notes to a three-week low. Jennifer Hughes

Have Canada and Australia finished raising rates? 

The Bank of Canada and Reserve Bank of Australia kick off September’s slew of central bank meetings, with markets betting that they will set the tone by pausing rates as monetary policymakers in the western world reach the twilight months of an aggressive rate raising campaign. 

The Bank of Canada, which delivered a 0.25 percentage point increase at its last meeting, is expected to hold rates at 5 per cent on Thursday despite recording stronger-than-expected inflation of 3.3 per cent in July. 

Swaps markets are pricing an 80 per cent probability that Canada’s central bank will hold rates, with a slowdown in economic growth and a rise in jobless rates giving scope for a rate pause overpowering concerns of a resurgence in inflation. 

Similarly the Reserve Bank of Australia is expected to keep its key interest rate at 4.1 per cent for the third month running. Australia’s inflation rate fell more than expected in the year to July, bringing the headline rate to 4.9 per cent. On top of cooling price growth, unemployment also increased 0.2 percentage points to 3.7 per cent in July. 

Markets are pricing in a near certainty that the RBA will hold rates next week. But analysts at ING expect a further rate rise this year, noting insufficient signs that inflation will cool to 2 per cent in the coming months. 

The central bank decisions come in a week where traders have pared back expectations of rate rises elsewhere. Markets are now betting that the Federal Reserve and European Central Bank are both likely to have finished raising rates. Mary McDougall

Will Turkey’s lira strengthen?

Turkey’s lira has already lost more than half of the gains it made after a sharp boost in interest rates — a break with years of unorthodox policy as the country’s new economic team attempts to tackle its outsized inflation problem. 

The lira rose close to 6 per cent against the dollar last week after Turkey’s central bank raised its one-week repo rate by 7.5 percentage points to 25 per cent, bringing the country’s interest rate to nearly triple the level of when President Recep Tayyip Erdoğan was re-elected in May and appointed a new central bank governor. 

But the currency has since slid more than 3 per cent, bringing it back close to historically low levels. Turkey’s inflation rate jumped to almost 50 per cent in the year to July, boosted by the lira’s weakness pushing up the cost of imports.

Under the direction of new finance minister Mehmet Şimşek, Turkey has abandoned its costly defence of the lira and allowed the currency to plummet more than a fifth against the dollar since the end of May.

Analysts say that the lira will continue to depreciate until investors have confirmation that Turkey’s central bank is committed to further monetary tightening. 

“The recent hike is very positive but not positive enough,” said Cagri Kutman at KNG Securities. “The next central bank meeting will be key. With inflation at 50 per cent, the central bank raising rates to 25 per cent has no meaning at all in real terms — they are still deeply negative.” Mary McDougall

Source: ft.com

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The great thing about inflation is if you spend the same on groceries, the bags are lighter and easier to carry home. Restaurants and food companies react to higher prices either by reducing their portion sizes or passing the cost on to the consumer. In real estate, does the modern definition of an “affordable” house mean 350 square feet for $130,000? Lennar thinks so. Owning a home has long been considered the quintessential American dream, but even with 84 percent of Americans saying they’d like to own a home one day, 51 percent who don’t own today worry they’ll never get there. 94 percent of consumers say owning a home is part of the American dream, but 49 percent say they can’t afford a down payment and 40 percent say home prices are too high in their area. Student loan debt weighs heaviest on millennials, with 19 percent citing it as a roadblock to homeownership. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with Black Knight’s Andy Walden and John Holbrook on the tappable equity market.)

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“Tickets to the Big Game aren’t available until September 7, but ad sales are already well underway, with many big brands having already secured their $7 million game-day advertising slot. While 2023 has been a lender’s thunder dome, the good news is that you don’t have to shell out millions to compete for borrowers’ attention. Surefire℠, Black Knight’s CRM and Mortgage Marketing Engine, comes packed with everything you need to keep pace with the billboard guys, from prebuilt marketing automation blueprints to award-winning multi-media content to dozens of native technology integrations. Download our free eBook for proven mortgage marketing game plans that won’t break the bank.”

Receiving your Freddie Mac, Fannie Mae, or Ginnie Mae approval not only adds value to the net worth of mortgage lenders, but several other doors also become open with these approvals. In this latest whitepaper, Getting Started with Agency Approvals, Jennifer R. Whip, CMB®, Michael Drayne, and MCT offer important tips on how to obtain these approvals. Topics featured in this whitepaper include why originators should seek approval, key components for agency approval, and common challenges and solutions in the approval process. Download the whitepaper today to learn more about getting started with agency approvals.

We’re over halfway done with 2023. For anyone who knows how to stay afloat in the mortgage space, that means keeping yourself abreast of what happened and what trends to expect. In the latest episode of Expert Insights, Joe Welu, CEO of Total Expert, sits down with the founder and CEO of the Basis Point, Julian Hebron, to give us a closer look at the mortgage space in mid-2023. Is the worst over despite the recent challenges and rising interest rates? Will we see a potential improvement in the next 6-12 months? Julian shares his data-driven insights, helping you navigate across issues in the lending and mortgage market­–from lender profitability to affordability challenges for homebuyers. Keep your eyes open to the market realities and the constantly changing landscape of the space. Listen now so you can take on hurdles and opportunities to drive success.

NEW: Maxwell’s Mini-Guide to Surviving Today’s Big Housing Market Reset. Is your lending business prepared for a market reset? To thrive, lenders need a fresh game plan driven by home buyer trends, creative lead generation, and insightful data. Maxwell put this guide together to help you refresh your thinking for the market ahead. In it, you’ll find advice from mortgage experts including Maxwell Co-founder & CEO John Paasonen, Rob Chrisman himself, theLender EVP Chris Ledwidge, and more. Their advice will teach you ways to rebuild your pipeline, the borrower segments that are still rising in the housing market, and how to better leverage data to make confident business decisions. Lenders: The next five years likely won’t be anything like the last five. Now is the time to rethink your business. Click here to download your free copy of Maxwell’s Mini-Guide to Surviving Today’s Big Housing Market Reset.

Correspondent and Broker Loan Products

The number of people who have been taking out home-equity lines of credit has been increasing. In fact, according to a recent survey performed by Mphasis Digital Risk, 40% of U.S. Millennial and Gen Z residents would opt for a HELOC over other borrowing options, including traditional bank loans, peer-to-peer loans, and credit cards. Whether your clients are looking for help with financial flexibility, debt consolidation, liquidity support, or home renovations, Symmetry Lending’s HELOCs can help. With our flexible options, industry-leading service, and competitive rates, our HELOC solutions can give your clients exactly what they want. At Symmetry, we serve Loan Officers with speed and always make sure to keep the process positive and simple. You’ve got enough on your plate; allow Symmetry to save the day and put our HELOC to work for you and your client. Call your Area Manager today or visit here to learn more.

Are you ready to help clients whose student loan repayments are set to resume? Rocket Pro TPO is preparing broker partners to be part of the solution with Rocket’s Student Loan Busters! From cash out options to home equity loans, clients can potentially reduce their monthly payments, streamline their number of separate payments, and take advantage of tax benefits. Are you offering the Fannie Mae Student Loan Refinance which features a waiver of the cash-out price adjustments? Talk to your Rocket Pro TPO Account Executive to learn more. You need the best affordable lending solutions to deliver options to more clients. ONE+ by Rocket Mortgage provides an incredible opportunity for Rocket Pro TPO partners. With this product, eligible clients provide 1 percent towards the down payment and the other 2 percent down payment requirement is covered. Plus, clients are not responsible for paying the mortgage insurance! And learn how you can use their 3-2-1 Temporary Buydown for additional payment relief. Interested in learning more about a Broker or Non-Delegated Correspondent partnership? Contact Rocket Pro TPO to learn more.

Training and Events Next Week

A good place to start is here, and click on “events.”

Tuesday the 5th is the next Mortgages with Millennials with Kristin Messerli and Robbie Chrisman, and sponsored by National MI. Tune in every Tuesday at 10AM PT to the weekly video show designed to empower mortgage professionals to tap into the millennial market. This show demystifies the psychology of first-time homebuyers and offers strategies to win more market share with a key segment of the market. Sign up for a weekly reminder with the link to join and a sneak peek into the next episode.

Join Plaza Home Mortgage® on Wednesday, September 6th at 11:00 AM PT / 2:00 PM ET for an insightful webinar where we will review Plaza’s Reverse Mortgage file flow process from loan scenario to funding. Plus, with our dedicated Reverse Mortgage Team guiding you through every step of this unique process, feel confident in setting the proper expectations for your senior clients to ensure a smooth closing. Don’t miss out on this important market segment.

Looking for more in-depth commentary on weekly mortgage news? Register here for “Mortgage Matters: The Weekly Roundup” presented by Lenders One. Every Wednesday at 2:00 PM EST/11:00 AM PT is a dive into a range of mortgage-related topics, including market trends, interest rate fluctuations, innovative mortgage products, and industry advancements. Robbie and Rob will bring a unique mix of age perspective, expertise, and charisma to the screen, ensuring that the information is not only educational but also entertaining.

Join Arch MI on Thursday, September 7th at 1PM ET for a featured webinar, Fundamentals of Employment Income, Understanding Documentation and Calculations. Presented by Stephanie M. Clark, AMP and Arch MI Senior National Trainer and Instructional Designer.

Please join MCT’s Phil Rasori, Chris Anderson, and Justin Grant on September 7th at 11am PT for an important webinar on MCT Geocoding & Bid Tape Protection Initiatives. In 2018, MCT launched an initiative to replace property address and loan number in the loan trading process. Recent headlines show that data security is more important than ever, which makes now the right time to finish the job and continue to reduce collateral NPI exchanged in the secondary market. Register today for a discussion of NPI, implementation plans to reduce its unnecessary exposure, and a review of internal data security and business continuity practices.

Loan servicers are invited to attend a free webinar on the MERS® Annual Report and third-party review process next Thursday, September 7th, at 3pm ET. Hear from the experts at Falcon Capital Advisors, an experienced and trusted third-party review firm, about the Annual Report process and how your organization can ensure it remains compliant with MERS® System requirements. Click here to register.

The Mississippi Mortgage Bankers Association is holding its fall conference September 7-8 in Jackson. Our theme for this year is “Building a Strong MS” We are focusing on building relationships, strategies, and opportunities for the real estate housing industry in MS. Our fall conference is open to loan originators, realtors, and other industry affiliates. Realtors will receive Continuing ED (CE) credits for attending the Fall Conference. On Friday, September 8th – 10:05 am – 11:00 am, join William Kooper, VP of State Government Affairs and Industry Relations at the Mortgage Bankers Association, for MAA/Legislative update.

Friday the 8th is The Mortgage Collaborative’s Rundown covering current events in the mortgage market for 30-45 minutes starting at noon PT in “The Rundown”.

The NAMB National Conference is just around the corner, and you don’t want to miss the opportunity to join Plaza Home Mortgage® for a thought-provoking session on Reverse Mortgages’ on Saturday, September 9th – 4:00pm at Caesars Palace, Emperor’s Ballroom 1. In this session, Mark Reeve, Plaza Home Mortgage® VP, Reverse Mortgage Division, will share why the aging Baby Boom generation, along with senior home equity – approaching close to 13 trillion dollars – is a market you cannot afford to ignore any longer. So, check out these highlights and learn who these borrowers are and how you can reach them.

Register for free with the code PLAZAFREE.

Capital Markets

We’ve now had three straight days of rallies in the bond markets (e.g., prices up, rates down). That’s happened about once in a blue moon as of late (the last time was in May), so good thing that we had a blue moon last night. Or “good” thing that yesterday we received some weaker-than-expected economic data in the form of the private sector adding 177k jobs in August versus 200k expectations, according to the ADP Employment Report. There was also the Dallas Fed Manufacturing Index falling to the lowest since May of 2020 and pending home sales falling in all four U.S. regions compared to one year ago. However, there were no significant changes to rate hike expectations with the implied likelihood of a November hike remaining just below the 50 percent mark.

Today brings the all-important Personal Consumption Expenditure report for July, which saw income and spending (+.2 percent & +.8 percent, respectively, both higher than expected) versus expectations of increases of 0.3 percent and 0.6 percent month-over-month, respectively. The Core PCE Price Index (+.2 for July, +3.3 percent for the year, no acceleration in inflation) versus expectations of it increasing 0.2 percent month-over-month and 4.2 percent year-over-year compared with 0.2 percent and 4.1 percent previously.

In employment news, we’ve also received job cuts from Challenger for August: U.S.-based employers announced 75,151 cuts in August, a 217% increase from the 23,697 cuts announced one month prior, 267 percent higher than the 20,485 cuts announced in the same month in 2022. Weekly jobless claims were 228k, down from 230k, 1.725 million continuing claims. Later this morning brings Chicago PMI for August, Freddie Mac’s Primary Mortgage Markets Survey, and remarks from Atlanta Fed President Bostic and Boston Fed President Collins. We begin the day with Agency MBS prices are better by .125 and the 10-year yielding 4.09 after closing yesterday at 4.12 percent. The 2-year is at 4.86 after the slew of economic news.

Jobs and Transitions

Champions Funding is actively looking for experienced Account Executives in the Non-QM space due to increased loan production and expansions to its product suite. Offering a competitive ITIN solution for both consumers & investors, Champions is increasing opportunities for the American Dream with the upcoming roll-out of Foreign National for investors plus expanded guidelines to include 5-8 units. These programs plus competitive DSCR & No Ratio are meeting the increased need in the market for other Non-QM options while fueling the company’s growth exponentially. CDFI improvements on all programs for eligible borrowers also differentiate the Champs from other Non-QM lenders. For immediate consideration, experienced Non-QM Account Executives are encouraged to reach out to Angela Castillo.

Directors Mortgage has hired one of the former NW Mortgage Group owners, Marty Quandt (NMLS-40554), as VP Builder Division to lead Director’s expanding builder division and help lead the company’s loan officer growth and development initiatives across the western United States. Marty, along with three other owners, started NW Mortgage Group in July 1995, just three years before Mark J. Hanna (NMLS-91462) founded Directors Mortgage in July 1998. And from there on, they watched each other’s companies succeed in the marketplace for many years until NW Mortgage Group sold to another company in 2014. “Marty’s years of expertise and leadership will bring a unique set of skills that our team members and clients will benefit from,” said Directors Mortgage CEO & Founder Mark J. Hanna. “To have such a long-standing professional in our industry join us is a testament to what we’ve built at Directors Mortgage.” (NMLS-3240. AZ Mortgage Banker License BK-0942517. Equal Housing Opportunity Lender.)

The Money Store welcomed John Palmiotto, a seasoned industry leader, to the company’s C-suite as the Chief Production Officer.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

United Wholesale Mortgage announced a new VA loan program Wednesday that offers borrowers mortgage rates as low as 2.25% for both purchases and refinances.

Last month UWM rolled out a new loan program that offered borrowers an interest rate as low as 2.5% for both purchase mortgages and refinances. 

For context, as of June 18, we reported that the average rate for a 30-year fixed mortgage was 3.13%, down from 3.21% the prior week.

UWM is both the nation’s biggest purchase mortgage lender and the largest wholesale lender, meaning it doesn’t lend directly to borrowers. It works directly with independent mortgage brokers, who can in turn offer these low rates to their customers.

By offering conventional 30-year fixed rates to veterans in the 2.25 to 2.375% range, UWM said it intends to “support veteran borrowers in one of the strongest purchase seasons on record due to pent up demand created by COVID-19.”

Source: housingwire.com

Apache is functioning normally

Ellie Mae‘s Origination Insight Report for June detailed the decline in mortgage rates for the sixth consecutive month, and noted some interesting trends in closing rates and FICO scores.

According to the report, the average 30-year rate fell from 3.43% in May to to 3.4% percent in June.

“Interest rates decreased for the sixth consecutive month and we’re seeing a rebound in the purchase market which now represents 42% of all closed loans, a 7% increase from May,” said Jonathan Corr, President and CEO of Ellie Mae.

During the month, the rate for 30-year conventional loans fell to 3.42%, declining from 3.4% in May. The rate on VA loans fell to 3.2% from 3.24% and the 30-year rate on FHA loans came in at 3.41%, down from 3.45% the month prior.

Notably, closing rates for all loans decreased to 73.4% in June, down from 76% in May, and the average time to close increased to 47 days in June, up from 45 days in May.

Ellie Mae indicates closing rates on refinances decreased to 73.2% in June, down from 75.9% in May, and closing rates on purchase loans decreased from 76.4% in May to 74.2%  in June.

“Homebuyers are taking advantage of these historically low rates to both buy and refinance but it does appear that lenders are looking for borrowers with better credit across all mortgage products as FICO scores have continued to increase across the board since March,” Corr said.

According to Ellie Mae, the average FICO scores on all closed loans increased to 751 in June, up from 750 in May, while FICO scores increased month-over-month for both purchase and refinances across conventional, FHA and VA loans.

Source: housingwire.com

Apache is functioning normally

By Prof. Viral V. Acharya, C.V. Starr Professor of Economics, Department of Finance, New York University Stern School of Business (NYU-Stern), and Satish Mansukhani, Managing Director, Investment Strategy, Rithm Capital

Since the onset of the Federal Reserve’s (the Fed’s) monetary tightening in 2022, the 30-year fixed mortgage rate in the United States (US) has gapped out to 7 percent. Around 300 basis points (bps) at present above the 10-year US Treasury yield (see Figure 1), this spread has historically been stable at around 200 bps; this was the case even during the pre-pandemic interest-rate hikes (2016-19) and quantitative tightening (QT, 2017-20) episodes.

Why is this time different?

We explain below that the current break from this trend is caused critically by the interplay of the Fed’s and domestic banks’ balance sheets. Changes in the risk appetites of institutional investors (bank and non-bank) and the profitability considerations of mortgage lenders have combined with this interplay to produce an unprecedentedly fast and amplified passthrough of monetary tightening to mortgage rates.

Deconstructing the 30-year mortgage rate

In addition to the 10-year Treasury yield, the 30-year primary mortgage rate serves as a commonly cited benchmark for the US economy and financial markets. Two contributors drive the spread between this mortgage rate and the Treasury yield.

The first contributor is the yield offered on the benchmark mortgage-backed securities (MBS) issued by government-sponsored enterprises Fannie Mae and Freddie Mac—the so-called “agency MBS basis”. This basis reflects the risk appetites of institutional investors to absorb or “warehouse” mortgage interest-rate risks on their balance sheets.

The second contributor is the profitability margin for mortgage lenders, known as the “primary-secondary spread”. It captures not only the market power of lenders in mortgage markets but also the banking sector’s balance-sheet constraints in intermediating for the real economy.

Consider, in turn, the 10-year Treasury yields and each of these contributors to the mortgage spread.

Punch #1: Higher 10-year US Treasury yields, driven up by real rates

Excessive monetary and fiscal stimulus throughout the pandemic combined with supply-side shocks to induce a surge in inflation since 2021. Until the last few months, this bout of inflation appeared rather unrelenting. In response, the Fed has tightened its monetary policy aggressively to cool inflation and the economy, and the 10-year Treasury yields, which were just 50 bps in 2020, are now close to 4 percent, a full 350 bps higher.

Viewed through another lens, the 10-year real rate has risen from a pandemic low of negative 100 bps to a post-GFC (Global Financial Crisis of 2007-08) high of 150 bps. Immediately before the pandemic, and even during the rate-hike and QT episodes of the mid-2010s, this real rate stood at barely 50 bps. The overall rise in real rates has also lifted mortgage rates.

Punch #2: A wider agency MBS basis, driven by higher volatility and a reversal in technicals

The agency MBS basis can be considered the market price of the unique option presented to US borrowers to refinance their mortgages or lock in attractive fixed rates (as is the case currently). The higher the volatility and the wider the outlook for the range of interest rates, the higher the price of this option. Compared to the mid-2010s’ rate hikes and QT, agency MBS spreads are 60 to 80 bps wider today.

For about 12 months after the onset of monetary tightening in March 2022, the 30-day rolling correlation of the agency MBS basis to interest-rate volatility (MOVE Index) remained high, ranging from 60 to 80 percent (that the two series were highly correlated until March 2023 can be seen in Figure 2).

However, the “technicals” of the MBS market today have shifted dramatically, with the Fed and domestic banks as the largest holders of this asset class. A key US bank dynamic has emerged since March 2023, given the collapses of three regional banks: Silicon Valley Bank (SVB), First Republic Bank and Signature Bank. In their wake, the agency MBS basis’s correlation to rate volatility has dipped, as seen by the rising agency MBS basis and declining MOVE Index. In contrast, the correlation of basis to the inverse of the stock valuation of regional banks has risen (again, see the individual series in Figure 2), reaching a peak of 35 percent in May 2023, marking the low in the regional bank index and simultaneously a high in the basis.

Punch #3: Wider mortgage-lender margins, driven by low volumes and high volatility

Turning to mortgage-lender margins, mortgage lending is a volume business in terms of the profits it generates for lenders and largely depends on refinancing transactions. Today’s high mortgage rates place a significant disincentive in the economics of the majority of US borrowers who have “locked in” at post-pandemic ultra-low rates, shriveling down lender volumes to mostly purchase transactions. The resulting low volume of home sales is thus translating into high competition among mortgage lenders.

High competition suggests banks should be willing to tighten margins. However, lender margins are modestly higher today than in the mid-2010s’ rate-hike and QT episodes, ranging back then between 90 and 100 bps compared to the present 110 and 120 bps. A key factor driving this margin wider is (again!) higher rate volatility, which increases the pipeline hedging costs of mortgage lenders during the period they commit to making a loan to closing and eventually pooling the loan into an MBS through securitization. This balance-sheet effect seems to have swamped the competitive effect.

Amplifying it all: banks’ and the Fed’s balance sheets moving in tandem

An additional factor has, however, made the confluence of these three effects even more potent.

The GFC, notably the distress in the housing and mortgage sectors, depleted both the capital and liquidity of banks, the largest mortgage lenders then. The nature of the post-GFC regulations and rules, notably the Dodd-Frank Act (Dodd-Frank Wall Street Reform and Consumer Protection Act), has made it costlier for banks to step into mortgages and MBS. In fact, a number of banks stepped away altogether from mortgage lending and servicing. The Fed filled this gap with some of its post-GFC quantitative-easing (QE) programs to support the mortgage and housing sectors. This backdrop led to relatively low levels of stable growth in the bank ownership of mortgages and MBS leading into the mid-2010s (see Figure 3).

However, as the Fed then halted QE and eventually embarked on QT, other rules, especially the favorable treatment of agency MBS as “high-quality liquid assets” in calculating the liquidity coverage ratio (LCR), led to a rise in the banks’ demands for MBS. This helped stabilize the MBS sector. And although banks made some (unrecognized) losses on their securities holdings by the end of the tightening cycle, cumulatively, the losses remained in aggregate below $75 billion.

Progression from this period into the pandemic saw the balance-sheet holdings of banks and the Fed paralleling (again, see Figure 3). The substantial stimulus led to an abundance of deposits (insured and uninsured) and low-yielding reserves at banks—but due to low demand in 2020, also a relative absence of sufficiently higher-yielding corporate loans in which to invest. The ultra-low rates and flat yield curve thus led to a search for yields, driving banks to buy Treasuries and agency MBS instead.

The post-pandemic monetary tightening of 2022 thus started with a far greater concentration of liquid-asset holdings in the hands of two large, correlated sets of balance sheets—namely, the Fed’s and the banks’. At present, new MBS issuances essentially have demand from neither, implying that the agency MBS basis is driven almost entirely by the risk appetites of non-bank institutional investors. As these investors are far more prone to rollover risks from heightened volatility, they demand greater risk premiums than banks typically would. This has significantly amplified the triple punch delivered to mortgage rates by monetary tightening.

What’s next?

An important lesson is that the unprecedented scale of fiscal and monetary stimulus during the pandemic worked through the commercial-banking system, creating the path dependency in how monetary tightening is now playing out, especially for mortgage markets.

Paradoxically, as mortgage rates rise, the willingness of labor in the US to adjust to sectoral demands lessens as the lock-in effects of ultra-low mortgage rates keep households from moving. This, in turn, keeps labor markets tight, wages high and inflation stubborn.

The Fed is thus caught between a rock and a hard place, with the demand- and supply-side effects of its tightening working in opposite directions. Which way will the pendulum swing? It is hard to know, but this may precisely be why interest-rate volatility has remained high.

ABOUT THE AUTHORS

Prof. Viral V. Acharya is the C.V. Starr Professor of Economics in the Department of Finance at the New York University Stern School of Business (NYU-Stern). He was the Deputy Governor at the Reserve Bank of India (RBI) from January 2017 to July 2019, in charge of Monetary Policy, Financial Markets, Financial Stability and Research.

Satish Mansukhani is the Managing Director, Investment Strategy, at Rithm Capital, a financial-services firm headquartered in New York City. In his prior roles as a sell-side strategist at Bank of America, Credit Suisse and Bear Stearns, Satish was perennially ranked for his work by Institutional Investor magazine.

Source: internationalbanker.com