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Year Begins With Mortgage Rates on the Upswing

Freddie Mac’s latest Primary Mortgage Market Survey (PMMS), measuring the 30-year fixed-rate mortgage (FRM) has found that the FRM averaged 6.48% for the week ending January 5, 2023, up from last week when it closed out 2022 at 6.42%. A year ago at this time, the 30-year FRM averaged 3.22%.

“Mortgage application activity sunk to a quarter century low this week, as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”

Also this week, the 15-year FRM averaged 5.73%, up from last week when it averaged 5.68%. A year ago at this time, the 15-year FRM averaged 2.43%.

“The Freddie Mac fixed rate for a 30-year loan kept rising this week, reaching 6.48%, even as the 10-year Treasury slid in the first week of the year,” said Realtor.com Manager of Economic Research George Ratiu. “Capital markets are reacting to the uncertainty brought about by the dichotomy between mounting recession expectations and incoming economic data which show continued resilience.”

And as 2022 came to an end, last minute holiday shopping did not apply to the housing market, as the Mortgage Bankers Association (MBA) reported that mortgage applications fell 13.2% from two weeks earlier for the week ending December 30, 2022. This marked a new low last seen in 1996 for overall app volume.

“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market,” added Khater. “Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates.”

MBA President and CEO Bob Broeksmit, CMB added, “Mortgage applications declined to close out 2022, continuing the trend seen for most of the past year. Although mortgage rates have increased slightly in recent weeks, MBA expects them to fall to around 5.2% by the end of 2023. We project lower rates and rising inventory levels as two positives for households wanting to buy a home in 2023.”

Redfin reports that the combination of slowing price growth, lower mortgage payments, and homes sitting on sale for well over a month is making the market a bit more favorable for buyers than it was in the fall, and some are starting to return. Mortgage-purchase applications were up 4.6% from a month ago and Redfin’s Homebuyer Demand Index, which tracks requests for tours and other Redfin homebuying services, was up 6.5%.

“Real estate markets are firmly in the winter season, with high prices and rates creating a barrier for many buyers on the road to homeownership,” added Ratiu. “Even as prices dropped 10% from the summer peak nationally, home values were still up by double-digits from last year in 79 out of the top 150 largest metros during November 2022. With the 30-year mortgage rate at 6.48%, the buyer of a median-priced home is looking at a monthly payment that is 64% higher than last year. We may have to wait until the start of the spring shopping season for more clarity on the direction of housing markets this year, especially as both buyers and sellers are pulling back from the marketplace.”

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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