Mortgage Rates Are Increasing – Industry Outlook

  • Mortgage Rates Increase – The Mortgage Bankers Association reported total mortgage application volume for refinances and home purchases decreased last week, dropping 7.4 percent from the previous week. Rising mortgage rates were the likely culprit, as they increased by the largest amounts since November 2016. “Rates continued to increase last week, given increasing evidence that the Fed and other central banks are more likely to raise rates,” says Michael Fratantoni, the MBA’s chief economist. “Additionally, minutes from the June Federal Open Market Committee meeting showed clear plans to start reducing the size and scope of the Fed’s balance sheet and to continue raising the fed funds rate, a signal of confidence in the U.S. economy and job market.”
  • Millions of Homeowners Have the Opportunity for Savings – According to a new report from Black Knight Financial Services, nearly 4.5 million borrowers are eligible to refinance and could realize savings on their monthly mortgage payments but have not taken advantage. The average borrower stands to save $260 a month. Nearly 700,000 borrowers could save $400 or more per month, the report shows. “Our data doesn’t tell us about motivation,” says Ben Graboske, senior vice president of data and analytics at Black Knight Financial Services. “It leaves us to surmise that the reason is apathy, lack of awareness and education.”
  • Seller Optimism Reaches a Record HighFannie Mae’s Home Purchase Sentiment Index showed that consumers’ view about the housing market zoomed to a record high in June, with seller optimism making up most of the uptick. The index rose 2.1 percentage points last month to an 88.3 reading, which matches a record high in February. The number of consumers who say now is a good time to sell a home reached a record high in June, rising 7 percentage points from the previous month. Researchers note that a strong seller’s market is emerging, as the margin of those who expressed optimism in selling grew wider than for those who expressed optimism in buying, according to the survey. But “consumers are also growing more optimistic about their ability to get a mortgage, and lenders expect credit standards to ease further going forward,” says Fannie Mae chief economist Doug Duncan.
  • Home Inventory Remains Tight According to the Commerce Department, housing starts fell 5.5 percent in May from the previous month; housing permits fell 4.9 percent. “Ten years ago, the problem in the housing market was lack of buyers,” said NAR chief economist Lawrence Yun. “Today, the problem is lack of sellers. Inventory levels are near historic lows. Consequently, home prices are running much higher. Over the past five years, prices have increased by 40 percent, while incomes have only grown by 10 percent.”  

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