A weekend topic starting with Bankrate. “‘Effectively, increased mortgage rates reduce conventional buyers’ buying power by 9% to 10% to 11%, pending their debt-to-income ratio,’ said Baron Christopher Hanson of Echo Fine Properties. ‘Pre-approved buyers for $500,000 to $1 million in mortgage funding can see their purchasing power reduced by $45,000 to $110,000 based on a rise in mortgage rates. This cooling of traditionally financed buying power across the board ultimately puts pressure on sellers hoping to earn top dollar on their homes.’”
“‘Current mortgage rates are making it less affordable to buy a home,’ said Adrian Brikho, senior mortgage advisor at Brik Home Loans. ‘Buyers who were on the edge of qualifying are going to get priced out of the market. We’re going to see a slowdown in demand in the coming months, which will affect the price a seller can get for their home.’”
“‘It’s important to remember that there is a consistent correlation between interest rates and home prices,” said Ward Morrison, CEO of Motto Franchising LLC. ‘When interest rates increase, affordability of homebuying decreases, causing an inverse reaction to home valuation. To offset this issue, the market stabilizes and home prices go down.’”
From Yahoo Finance. “Higher interest rates may actually be a good thing for home prices and the housing market in general. ‘Low rates make housing less affordable in the long run and rates have been on a long downward trend,’ wrote Jonathan Miller, CEO of Miller Samuel Inc., a real estate appraisal and consulting firm.”
From Business Insider. “‘Buyer demand is moderating in the face of high costs, and we’re beginning to see more homeowners take price cuts on their listings and overall inventory declines lessen in response,’ Danielle Hale, Realtor.com chief economist, told Insider. Though the average listing price was $405,000, 6% of homes actually sold at a lower price than they were listed.”
From Market Watch. “While an inversion of the yield curve may not have a direct impact on mortgage rates, it can prompt lenders to be stingier. In the past, yield-curve inversions have been associated with a tightening of credit. ‘If it costs more to borrow short term than what you’re going to earn by lending long term, you’re going to do less lending,’ said Greg McBride, chief financial analyst at Bankrate.com.”
From My San Antonio. “More than 90 employees have been laid off in USAA Federal Savings Bank’s mortgage department as the need for its services have dwindled. The employee positions were eliminated as the bank projects a 34% drop to 25,000 real estate loans despite having staff in place to facilitate an anticipated 38,000 loans, the Express-News reported. Emails to staff obtained by the Express-News say the challenging home buying market and rising interest led to the terminations.”
From Housing Wire. “Nonbanks and mortgage subsidiaries of chartered banks reported grim profitability figures in the fourth quarter of 2021, when costs reached a new high and margins fell to the lowest level since early 2019. And most industry observers think it will only get worse in the next few quarters. Net gains in Q4 declined to $1,099 on each loan originated, compared to $2,594 in the previous quarter, according to a report published by the Mortgage Bankers Association.”
From Better Dwelling. “Canadian mortgages are getting a lot more expensive as bond yields surge higher. The benchmark Government of Canada (GoC) bonds are climbing, influencing fixed-term mortgage costs. Canada hasn’t seen this kind of pressure on bond yields since the 90s, at the peak of the last tightening cycle. This cycle, however, is just getting started. Expect mortgage rates to climb like they haven’t in a whole generation.”
“‘That is the steepest one-year move in this key bond since the late 1990s and was last seriously topped in the great tightening cycle of 1994/95 (when yields popped by more than 400 bps in a year),’ says BMO Chief Economist Douglas Porter. ‘That’s the largest five-year rise in five-year rates in 40 years of records.’”
From News.com.au in Australia. “The RBA could deliver an interest rate hike in June, and then at least six more by the end of the year, according to market expectations. As the red line in this next graph shows, the future of interest rates is up, up, up. The average new home loan for an owner-occupier these days is a bit over $600,000. Repayments on that loan are around $2350 a month at the average mortgage rate (2.48 per cent). If interest rates go up seven times by December, repayments would be $2,950 a month. That’s an extra $600. Can you find that much extra in just nine months?”
“Have no doubt the banks would pass on interest rate rises in full. In fact, they’ve been lifting some mortgage interest rates before that even happens. Take a look at fixed interest rates. Recently they were below variable interest rates, as the next graph shows. Banks thought they would benefit from locking your rate in. Now, fixed rates have shot up as banks realise locking people into a low rate was good for the customer, not for them. Rising fixed rates are a sign banks don’t want to lock people into a low rate; a sign banks think official interest rates will be rising soon, and variable rates will pop up too.”
The Delaware News Journal. “As of March 31, the national average for a 30-year fixed-rate mortgage is 4.67%, according to the Federal Home Loan Mortgage Corporation, known as Freddie Mac. That’s up from about 3.05% in March 2021, said John Chartrand, Del-One Federal Credit Union chief lending officer.The jump in rates happened quickly. When the U.S. weekly average for a 30-year, fixed rate mortgage climbed to 4.16% March 17, that was the first time the rate exceeded 4% since May 2019, according to Freddie Mac. Then the rate climbed to 4.42% March 24 and rose again to 4.67% March 31.”
“‘We have enjoyed an incredible run of very low interest rates,’ said Jeff Ruben, president of WSFS Mortgage. ‘I think we were poised for rate increases just before pandemic happened but then there was real initiative to spur lower interest rates to help the economy during the pandemic. We’re now paying the price for that long-term period of accommodative lending.’”