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After Giant Leap, Mortgage Rates Cool Slightly

After last week’s jump in the 30-year fixed rate mortgage (FRM) to 6.70%, Freddie Mac reported the FRM slid slightly this week, falling to 6.66% as of October 6, 2022.

A year ago at this time, the 30-year FRM averaged more than half that total when it read 2.99%.

“Mortgage rates decreased slightly this week due to ongoing economic uncertainty,” said Sam Khater, Freddie Mac’s Chief Economist. “However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers.”

Freddie Mac also found that the 15-year FRM averaged 5.90% with an average 1.0 point, down from last week when it averaged 5.96%. A year ago at this time, the 15-year FRM averaged 2.23%. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.36% with an average 0.3 point, up from last week when it averaged 5.30%. A year ago at this time, the five-year ARM averaged 2.52%.

The wreckage left in the wake of Hurricane Ian impacted the mortgage marketplace this week, as the Mortgage Bankers Association (MBA) reported overall mortgage application volume fell 14.2% week-over-week, according to the MBA’s Weekly Mortgage Applications Survey for the week ending September 30, 2022. Year-over-year, the MBA reported that purchase apps tumbled 37% year-over-year.

“Mortgage rates continued to increase last week, combining with ongoing economic uncertainty and Hurricane Ian’s devastation in Florida to produce a 14% decline in mortgage applications,” noted Bob Broeksmit, CMB, President and CEO of the MBA. “As prospective homebuyers continue to navigate affordability challenges, the ARM share of purchase mortgage applications climbed to nearly 12%.”

CoreLogic estimates that wind losses for residential and commercial properties in Florida as a result of Hurricane Ian are expected to be between $22 billion and $32 billion, while insured storm surge losses in Florida are expected to be an additional $6 billion to $15 billion.

“This is the costliest Florida storm since Hurricane Andrew made landfall in 1992 and a record number of homes and properties were lost due to Hurricane Ian’s intense and destructive characteristics,” said Tom Larsen, Associate VP of Hazard & Risk Management for CoreLogic. “Hurricane Ian will forever change the real estate industry, and city infrastructure. Insurers will go into bankruptcy, homeowners will be forced into delinquency, and insurance will become less accessible in regions like Florida.”

Redfin recently reported that the typical homebuyer’s monthly mortgage payment has climbed $337—or 15%—over the past six weeks to a new high of $2,547.

“While rate increases are needed to tame inflation and alleviate the burden it places on household budgets, higher borrowing costs have caused consumers to think twice about major purchases like homes and cars,” said Realtor.com Chief Economist Danielle Hale. “This is reflected in housing data which shows that the number of homes for sale continues to climb even as we see fewer new sellers today compared to one year ago. Today’s home shoppers have more choices, but for many, the increased cost of financing and higher home prices mean fewer affordable options. As challenging as it may be to set and stick to a budget in this environment of rising prices and rates, it’s more important than ever to do so.”

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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