Oct 25 (Reuters) – The interest rate on the most popular U.S. home loan last week jumped to the highest since September 2000, marking its seventh straight weekly increase and driving mortgage applications to a 28-year low, a survey showed on Wednesday.
The 7.9% average contract rate for a 30-year fixed-rate mortgage during the week ended Oct. 20 was up 20 basis points from the prior week, the Mortgage Bankers Association said.
“Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995,” MBA vice president and deputy chief economist Joel Kan said. “These higher mortgage rates are keeping prospective homebuyers out of the market and continue to suppress refinance activity.”
The cost of borrowing to buy a house has risen even as the Federal Reserve has put its inflation-fighting rate-hike campaign on pause, after lifting its benchmark policy rate from near zero in March 2022 to 5.25-5.50% in July of this year.
The 30-year fixed rate mortgage is up 81 basis points since then, tracking a similar rise in the yield on the 10-year Treasury note, the main benchmark for longer-term U.S. borrowing rates.
Reporting by Ann Saphir; Editing by Toby Chopra
Our Standards: The Thomson Reuters Trust Principles.
[1/2]A “sold” sign is seen outside of a recently purchased home in Washington, U.S., July 7, 2022. REUTERS/Sarah Silbiger/File Photo Acquire Licensing Rights
Nov 28 (Reuters) – U.S. annual home price growth accelerated again in September, underscoring the rebound of the housing market as it entered the final quarter of the year, data showed on Tuesday.
Home prices rose 6.1% on a year-over-year basis in September, up from an upwardly revised 5.8% increase in the prior month, the Federal Housing Finance Agency (FHFA) said.
On a quarterly basis, annual house prices increased 5.5% between the third quarter of last year and the comparative period this year.
Home prices rose 2.1% in the third quarter compared to the second quarter of this year, reflecting the reacceleration since June that has taken place following a period of softness in the market.
The report also showed prices rose moderately on a month-over-month basis, in line with recent trends. Prices were up 0.6% in September, compared with an upwardly revised 0.7% month-over-month increase in August.
The cost of mortgage loans fell last week to a two-month low after topping out at almost 8% in October, the highest level in more than 20 years. Despite the dip, housing inventory remains low, which has kept a floor under prices paid for properties.
The Federal Reserve kept its benchmark overnight lending rate unchanged earlier this month after raising its policy rate from the near-zero level in March 2022 to the 5.25%-5.50% range in July 2023.
Investors do not expect another rate increase and are currently forecasting a rate cut in May of next year, given the Fed has indicated it would raise interest rates again only if progress in controlling inflation faltered.
Annual house prices rose the most in the New England and Middle Atlantic regions in August, with gains of 11.4% and 8.3%, respectively, the FHFA data showed.
A separate report on Tuesday bolstered the view that the housing market is ramping up again, with the S&P CoreLogic Case-Shiller national home price index posting a 3.9% increase in September on an annual basis. That compared to a 2.5% rise in August.
Prices in Detroit accelerated the most on a city basis, overtaking Chicago, which had held the top spot for fourth straight months, the Case-Shiller data showed.
Reporting by Lindsay Dunsmuir; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
Higher mortgage rates sidelined demand for newly built homes in October.
Sales of new homes decreased 5.6% to a seasonally adjusted rate of 679,000 units last month from September’s seasonally adjusted annual rate of 719,000, according to the Census Bureau on Monday. That was much lower than Bloomberg consensus expectations of 725,000 units for October but still 17.7% higher than a year ago.
The slide in sales activity likely underscores the late summer spike in mortgage rates, according to one expert, which spooked budget-conscious buyers.
Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a house?
“I expect that we’ll see a decline in October. When we look at this data, it reflects the contracts entered into in August and September when rates were still climbing,” RSM US real estate senior analyst Crystal Sunbury told Yahoo Finance ahead of the release. Sunbury noted that closing on a new home takes about 30 to 60 days.
“By December we should see some recovery in new home sales, given the retreat in mortgage rates,” Sunbury said.
Mortgage rates crested 7% in mid-August and stayed about that threshold throughout September before surging even higher in October, hitting 7.79% the last week of that month, according to Freddie Mac. Rates have retreated for four straight weeks since then, dropping by a half-point so far in November.
Similarly, higher borrowing costs provided a monthly blow to existing home sales in October, which dropped 4.1% month over month and down 14.6% from the prior year, according to the National Association of Realtors (NAR).
A lack of inventory on the resale side has also weighed on sales. Many current homeowners are hanging on to their current homes because they remain reluctant to trade up and lose their existing low mortgage rate.
The number of previously owned homes for sale at the end of October was 1.15 million units, per NAR data, the lowest inventory level for that month since 1999.
That had been a boon to new home sales this year even as mortgage rates march higher. Builders have filled in some of the inventory gaps. At the end of October, the number of new houses for sale was 439,000, or a 7.8-month supply at the current sales pace.
To take the edge off rates, many public homebuilders have been offering below-market-rate home loans. For example, in Santa Fe, N.M., PulteGroup (PHM) is developing new communities, offering a 30-year fixed rate of 5.75%.
Read more: Types of mortgage loans: Buying a house in 2023
But smaller builders have been far less sanguine about market conditions. These builders are not as well-capitalized for future projects and don’t have the financial bandwidth to offer the same kind of mortgage rate buydowns as the bigger guys.
In October, 36% of smaller builders reported cutting home prices, up from 32% in the two previous months. Data from the National Association of Home Builders found this is the highest share of builders cutting prices during this cycle.
For instance, the median sales price of new homes sold in October was $409,300, the government reported, down from $422,300 the month before. The average sales price was $487,000, lower than September’s revised figure of $515,400.
That has hurt overall builder sentiment.
The October BTIG/HomeSphere survey, which polls 75 to 125 small and mid-sized builders nationally, found sales and traffic trends worsened despite “easy year-over-year” comparisons, BTIG homebuilding analyst Carl Reichardt Jr. wrote in a note.
“The bottom line: our survey suggests that new home demand trends remain quite sluggish for private builders,” Reichardt wrote.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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[1/2]A man walks past houses ‘For Sale’ in a residential street in London, Britain, September 27, 2022. REUTERS/Hannah McKay Acquire Licensing Rights
LONDON, July 11 (Reuters) – A key British mortgage rate hit a 15-year high on Tuesday when it rose above the levels reached in the aftermath of September’s “mini-budget” crisis, adding to strains on the country’s slowing housing market as the Bank of England battles stubborn inflation.
The average two-year fixed residential mortgage rate climbed to 6.66%, narrowly exceeding the 6.65% touched on Oct. 20 and the highest since August 2008 when it stood at 6.94%, according to data provider Moneyfacts.
Britain’s housing market activity staged a recovery in early 2023 from the turmoil triggered by the unfunded tax-cutting plans of former Prime Minister Liz Truss. But homeowners and buyers have faced renewed mortgage pain in recent months.
Fixed mortgage deal rates have risen rapidly in recent weeks as stickier-than-expected consumer price inflation, which held at 8.7% in May, pushed up bond yields and increased market bets on the BoE’s benchmark rate peaking at 6.5%, up from 5% now.
Governor Andrew Bailey said last month there were signs of more persistent underlying inflation pressures after the BoE unexpectedly raised its Bank Rate to 5% in an effort to tame the highest inflation rate among the world’s big rich economies.
Swap rates, a key measure lenders use to determine the cost of mortgage borrowing, have also soared. Two-year swaps jumped by 0.89 percentage points over the course of June.
The surge has prompted major mortgage lenders to repeatedly reprice home loan offerings.
Lenders including Nationwide, Lloyds Bank and Santander on Tuesday told lawmakers on the Treasury Committee in Britain’s parliament that mortgage payment arrears had increased slightly but remained below pre-pandemic levels.
“Undoubtedly, households and customers are feeling the effect of not just mortgage rates increasing but the wider cost of living crisis … but arrears remain very low in a historical context, and still below what we’d have seen pre-COVID,” Andrew Asaam, homes director at Lloyds Banking Group told lawmakers.
However, most households have yet to face the impact of higher borrowing costs as they are still locked in to previous deals.
British homebuyers typically take out mortgages with an interest rate that is fixed for two or five years, and then remortgage on to a new fixed rate or accept a variable rate.
Trade body UK Finance estimates 800,000 Britons will need to refinance loans in the second half of this year, and a further 1.6 million in 2024 of a total of nearly 7 million fixed-rate mortgages that are outstanding.
Analysis from the Resolution Foundation, a think tank, shows the average homeowner who refinances a home loan in 2024 will have to pay an extra 2,900 pounds ($3,732.88) a year.
House prices have also shown the hit to the market. Mortgage lender Halifax reported a 2.6% annual fall in house prices in June, the largest decline since 2011, while Nationwide reported a 3.5% drop year-on-year last month, the biggest since 2009.
($1 = 0.7769 pounds)
Reporting by Suban Adbulla and Sachin Ravikumar; Editing by William Schomberg, Kate Holton and Andy Bruce
Our Standards: The Thomson Reuters Trust Principles.
With the mortgage crisis in full swing, you never quite know what will happen next, especially as the situation continues to threaten markets worldwide.
That brings us to one of the latest victims of the credit crunch, a familiar name in an unfamiliar place.
GMAC Mortgage and Atlas Funding, both subsidiaries of GMAC’s finance unit ResCap, announced that because of ongoing problems in the credit markets, they would be suspending loan origination in the Netherlands indefinitely.
“GMAC Mortgage and Atlas Funding can reconsider this decision if market conditions improve in the future,” the companies said in a statement, obtained by Reuters.
It is believed that recent troubles in the mortgage securities department forced the company to make the decision, as the unit could no longer securitize its mortgage loans.
Per the Dutch paper Financieele Dagblad (which I’ve translated with Google), the companies halted the issuing of new mortgages on Monday after aggressively building up a 4 percent market share in the country.
The paper said the mortgage lenders provided loans to 50,000 Dutch homeowners and would continue to service existing mortgages despite the halt in new production.
ResCap has seen its share of problems over the last year and change, recording a $4.35 billion loss for all of 2007 while cutting 3,000 jobs, or roughly 25 percent of its workforce.
Last month, parent GMAC said it had no plans to inject additional capital into ResCap and was actively pursuing strategic alternatives for the money-losing unit, including a possible sale of all or parts of the unit.
ResCap includes a number of large brands worldwide, including Homecomings Financial, Ditech, GMAC-RFC, GMAC Mortgage, and GMAC Bank.
The 30-year fixed mortgage rate this week climbed to 8%, reaching that level for the first time since 2000, according to Mortgage News Daily.
The milestone arrives after months of rate increases. As recently as last April, the 30-year fixed mortgage rate stood below 5%, Mortgage News Daily data shows.
An aggressive series of interest rate hikes by the Federal Reserve since last year has pushed up the 10-year Treasury bond yield, which loosely tracks with long-term mortgage rates.
The Fed has increased interest rates to fight elevated inflation, attempting to slash price hikes by slowing the economy and choking off demand.
While inflation has fallen significantly from a peak of about 9% last summer, price increases remain more than a percentage point higher than the Fed’s inflation target.
The persistence of elevated inflation has prompted the Fed to espouse a policy of holding interest rates at high levels for a prolonged period, which in turn has increased the 10-year Treasury yield and put upward pressure on mortgage rates.
Mortgage rates have increased for five consecutive weeks, according to data released by Freddie Mac last Thursday.
Major housing industry groups voiced “profound concern” about rising mortgage rates in a letter last week that urged the Federal Reserve to stop hiking its benchmark interest rate.
“The speed and magnitude of these [mortgage] rate increases, and resulting dislocation in our industry, is painful and unprecedented,” wrote the real estate groups, among them the National Association of Realtors and the National Association of Home Builders.
High mortgage rates have dramatically slowed the housing market, since homebuyers have balked at the stiff borrowing costs, and home sellers have opted to stay put with mortgages that lock them into comparatively low rates.
Mortgage applications have fallen to their lowest level since 1996, the Mortgage Brokers Association said earlier this month.
Sales of previously owned homes, meanwhile, plummeted more than 15% in August compared to a year ago, according to the National Association of Realtors. The slowdown has coincided with a sharp rise in costs for potential homebuyers.
When the Fed initiated the rise in bond yields with its first rate hike of the current series, in March of 2022, the average 30-year fixed mortgage rate stood at just 4.42%, Mortgage News Daily data shows.
Each percentage point increase in a mortgage rate can add thousands or even tens of thousands in additional costs each year, depending on the price of the house, according to Rocket Mortgage.
Speaking at a press conference in Washington, D.C., last month, Fed Chair Jerome Powell acknowledged the continued effect on mortgages of rising interest rates, noting then that activity in the housing market “remains well below levels of a year ago, largely reflecting higher mortgage rates.”
The Fed expects to raise rates one more time this year, according to projections released last month. The central bank plans to make its next rate-hike decision in early November.
HONG KONG, Sept 11 (Reuters) – HSBC Holdings will raise its mortgage rates in Hong Kong by a maximum of 50 basis points, a spokesperson for the bank said on Monday, as it tries to maintain its profit margin amid higher interest rates.
New mortgage loans linked to the Hong Kong Interbank Offered Rate (HIBOR) from HSBC will be increased to as much as 4.125% from 3.625%, effective Sept. 18, according to the spokesperson.
“We have decided to revise our mortgage rate following a recent review, which takes into account a range of factors, including HIBOR, our competitiveness and market pricing,” the spokesperson said in a statement.
The move by the territory’s largest lender weighed on Hong Kong property developers’ stocks on Monday, with the market’s real estate gauge (.HSNP) shedding 3.28%, compared with a 0.58% dip in the benchmark Hang Seng Index (.HIS).
Sun Hung Kai Properties (0016.HK) slumped 9.5% after the Hong Kong property giant reported a 17% decline in underlying profit for the year ended June.
Hong Kong banks, including HSBC, last raised mortgage rates by 25 basis points in December, after Hong Kong’s central bank hiked rates following the U.S. Federal Reserve.
Interest rates in Hong Kong have been on the rise as its monetary policy moves in lock-step with the U.S., as its currency is pegged to the U.S. dollar.
Hong Kong interbank rates also spiked this year. One-month HIBOR , which is the benchmark banks take as a reference for residential mortgages in the city, hit 5.42988% on Aug. 2, the highest since mid-October, 2007.
Private home prices in the city had been declining for three consecutive months by July, official data showed, as high rates and a weak economic outlook weigh on sentiment.
Reporting by Xie Yu，Donny Kwok and Selena Li; Editing by Himani Sarkar and Sharon Singleton
Our Standards: The Thomson Reuters Trust Principles.
A ‘Greenery-Filled Terrarium’ Will Be at the Center of New ODA Skyscraper in Seoul
An expansive “sky garden” will sit at the middle of Terrarium Cheong-Dam, a new skyscraper in Seoul, South Korea, designed by architecture studio ODA. The 45-story, 200-meter tower will be built in the city’s Gangnam district and will have a mix of high-end residences and offices. The semi-private sky garden, which ODA refers to as a “terrarium,” will cut through the center of the modern building. Plus, the skyscraper will sit on a podium with a public park. The addition of the greenery is intended to enhance the surrounding urban landscape. Dezeen
U.S. Mortgage Rates Hit a 23-Year High
The interest rate for a 30-year fixed-rate mortgage has hit its highest level since September 2000, following the seventh consecutive weekly increase. Now at 7.9%, the highest interest rate in 23 years is driving mortgage applications to a 28-year low. “Mortgage activity continued to stall, with applications dipping to the slowest weekly pace since 1995,” MBA vice president and deputy chief economist Joel Kan said. “These higher mortgage rates are keeping prospective home buyers out of the market and continue to suppress refinance activity.” Reuters
U.K. Landlords Threaten to Quit Over Proposed Renters’ Reform Bill
More than half of landlords in the U.K.—54%—said they would consider quitting because of the proposed Renters’ Reform bill, which is now getting a second reading. One out of five landlords said abolishing no-fault evictions is one of the least attractive elements of the reform bill, as it is currently the only way to quickly evict tenants. “It’s important that landlords are given the time and information they need to prepare for significant upheaval in the coming years, so they can continue to provide much-needed housing for almost five million households nationwide,” said Alan Thomas, U.K. chief executive at Simply Business. PropertyWire
Danny McBride Lists Hollywood Penthouse for $1.8 Million
Actor and screenwriter Danny McBride is parting with his longtime Hollywood condo, which is now on the market for $1.8 million. McBride, who created the HBO comedy shows “Eastbound & Down,” “Vice Principals” and “The Righteous Gemstones,” purchased the duplex penthouse in 2009 for a little more than $1.4 million. The home, which has previously been listed both on the sales and rental markets, sits on the 10th floor of the landmarked Broadway Hollywood and overlooks the Hollywood Sign and the Capital Records Building. Spanning almost 2,200 square feet, the penthouse has double-height ceilings, one bedroom and two bathrooms. McBride and his family have primarily lived in Charleston, South Carolina, since 2017. Robb Report
NEW YORK, Oct 19 (Reuters) – Relentless selling of U.S. government bonds has brought Treasury yields to their highest level in more than a decade and a half, roiling everything from stocks to the real estate market.
The yield on the benchmark 10 year Treasury – which moves inversely to prices – briefly hit 5% late Thursday, a level last seen in 2007. Expectations that the Federal Reserve will keep interest rates elevated and mounting U.S. fiscal concerns are among the factors driving the move.
Because the $25-trillion Treasury market is considered the bedrock of the global financial system, soaring yields on U.S. government bonds have had wide-ranging effects. The S&P 500 is down about 7% from its highs of the year, as the promise of guaranteed yields on U.S. government debt draws investors away from equities. Mortgage rates, meanwhile, stand at more than 20-year highs, weighing on real estate prices.
“Investors have to take a very hard look at risky assets,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York. “The longer we remain at higher interest rates, the more likely something is to break.”
Fed Chairman Jerome Powell on Thursday said monetary policy does not feel “too tight,” bolstering the case for those who believe interest rates are likely to stay elevated.
Powell also nodded to the “term premium” as a driver for yields. The term premium is the added compensation investors expect for owning longer-term debt and is measured using financial models. Its rise was recently cited by one Fed president as a reason why the Fed may have less need to raise rates.
Here is a look at some of the ways rising yields have reverberated throughout markets.
Higher Treasury yields can curb investors’ appetite for stocks and other risky assets by tightening financial conditions as they raise the cost of credit for companies and individuals.
Elon Musk warned that high interest rates could sap electric-vehicle demand, which knocked shares of the sector on Thursday. Tesla’s shares closed the day down 9.3%, as some analysts questioned whether the company can maintain the runaway growth that has for years set it apart from other automakers.
With investors gravitating to Treasuries, where some maturities currently offer far above 5% to investors holding the bonds to term, high-dividend paying stocks in sectors such as utilities and real estate have been among the worst hit.
The U.S. dollar has advanced an average of about 6.4% against its G10 peers since the rise in Treasury yields accelerated in mid-July. The dollar index, which measures the buck’s strength against six major currencies, stands near an 11-month high.
A stronger dollar helps tighten financial conditions and can hurt the balance sheets of U.S. exporters and multinationals. Globally, it complicates the efforts of other central banks to tamp down inflation by pushing down their currencies.
For weeks, traders have been watching for a possible intervention by Japanese officials to combat a sustained depreciation in the yen, down 12.5% against the dollar this year.
“The correlation of the USD with rates has been positive and strong during the current policy tightening cycle,” BofA Global Research strategist Athanasios Vamvakidis said in a note on Thursday.
The interest rate on the 30-year fixed-rate mortgage – the most popular U.S. home loan – has shot to the highest since 2000, hurting homebuilder confidence and pressuring mortgage applications.
In an otherwise resilient economy featuring a strong job market and robust consumer spending, the housing market has stood out as the sector most afflicted by the Fed’s aggressive actions to cool demand and undercut inflation.
U.S. existing home sales dropped to a 13-year low in September.
As Treasury yields surge, credit market spreads have widened with investors demanding a higher yield on riskier assets such as corporate bonds. Credit spreads blew out after a banking crisis this year, then they narrowed in subsequent months.
The rise in yields, however, has taken the ICE BofA High Yield Index (.MERH0A0) near a four-month high, adding to funding costs for prospective borrowers.
Volatility in U.S. stocks and bonds has bubbled up in recent weeks as expectations have shifted for Fed policy. Anticipation of a surge in U.S. government deficit spending and debt issuance to cover those expenditures has also unnerved investors.
The MOVE index (.MOVE), measuring expected volatility in U.S. Treasuries, is near its highest in more than four months. Volatility in equities has also picked up, taking the Cboe Volatility Index (.VIX) to a five-month peak.
Reporting by Saqib Iqbal Ahmed; Writing by Ira Iosebashvili; Editing by Stephen Coates
Our Standards: The Thomson Reuters Trust Principles.
Pending home sales rose a surprising 6.3 percent in April to the highest level since October, but still fell 13.1 percent short of levels seen in April 2007, according to the National Association of Realtors.
Economists polled by Reuters had on average expected pending home sales to fall 0.5 percent during the month.
Chief Economist Lawrence Yun noted that so-called bargain hunters have begun to enter the market again, particularly in areas that experienced double-digit price declines.
In the West region where home prices have been plummeting, pending home sales climbed 8.3 percent in April and were four percent higher than April 2007.
In the Midwest, pending sales surged 13 percent from March to April, but remained 14.1 percent below year ago levels.
The index increased 4.6 percent in the South, but remain 22.5 percent below year-ago levels, and in the Northeast, the index dipped 1.9 percent to levels 12.2 percent below those seen in April 2007.
Yun added that home sales are close to levels seen 10 years ago, but with 25 million more people and 10 million more jobs, there is “pent-up demand” curtailed in part by difficult mortgage availability conditions.
He said existing home sales should rise from an annual pace of 5.05 million units in the second quarter to 5.83 million in the fourth quarter.
Existing home sales should total about 5.40 million units in 2008 and rise 6.3 percent to 5.74 million in 2009, with gains greatest in areas of significant decline, he added.
Yun sees existing home prices falling 8.4 percent in the first half of the year, followed by stabilization in the second half and a 4.4 percent gain in 2009 to a median of $213,900.
It’s important to note that much like mortgage application volume, purchase contracts are probably subject to more fallout as credit conditions remain extremely tight.