Mortgage Market Roundup: Interest Rates (9/17/15)
Mortgage rates are holding firm before the Federal Reserve’s rate announcement, according to Freddie Mac’s weekly market survey.
- 30-year fixed-rate mortgages averaged 3.91% with an average 0.6 point for the week ending Sept. 17, 2015. A year ago, the rate averaged 4.23%.
- 15-year fixed rates averaged 3.11% with an average 0.6 point. The same term priced at 3.37% a year ago.
- 5-year adjustable-rate mortgages priced at 2.92% with an average 0.5 point. Last year at this time the same ARM averaged 3.06%.
“The Treasury market was relatively quiet this week, and as a result the 30-year mortgage rate barely budged,” Sean Becketti, chief economist for Freddie Mac, said in a release. “Even if the Fed decides to raise short-term interest rates, we don’t expect a significant impact on the housing market. We’re still on track for the best year of home sales since 2007.”
Borrowers took a late-summer break as mortgage applications fell 7% for the week ending Sept. 11, according to the Mortgage Bankers Association. Statistics were adjusted for the Labor Day holiday. Refinance application volume also sagged, down 9% from the previous week.
What an interest rate hike by the Fed will mean for homebuyers
Whether the Federal Reserve raises short-term interest rates today, next month or next year, homebuyers will certainly be affected, in some markets even more than others.
“The potential move away from zero interest rate policy, for short-term rates, is a harbinger of higher mortgage rates ahead and the beginning of the end of this seven-year era of incredibly low mortgage rates and corresponding high affordability,” Jonathan Smoke, chief economist for Realtor.com, said in a statement provided to NerdWallet.
Smoke says just a 50 basis point increase in home mortgage interest rates — for example, from 4% to 4.5% — would increase monthly payments 6% on new mortgages, while causing a 7% rejection of loan applications.
“Based on analysis of loan-level ratios for a large sample of loans approved in the first half of this year, as much as 7% of mortgage applicants would have failed to get approval as a result of higher debt-to-income ratios caused by higher rates,” Smoke said.
Smoke says the markets most affected by rising home loan rates, with a potential for 10% or more of failed mortgage applications, would include:
- Honolulu (14%)
- Stockton, California (12%)
- Fresno, California (12%)
- El Paso, Texas (11%)
- Fort Pierce, Florida (11%)
- San Diego (11%)
- Chattanooga, Tennessee (10%)
- Los Angeles (10%)
- Miami (10%)
- Modesto, California (10%)
- Reno, Nevada (10%)
- Sacramento (10%)
- San Francisco (10%)
Housing starts stumble, but permits positive
Builders are still behind the curve of housing demand, but momentum may be growing. The Commerce Department reports today that U.S. housing starts fell 3% in August while building permits were up 3.5%.
The volume of permits is up more than 12% from one year ago. Housing starts, while down last month, are still nearly 17% ahead of the August 2014 rate.
Home affordability takes another hit
Buying a home is a bigger challenge than just one year ago, as the median price of a single-family home rose nearly 6%, to $235,500 since July 2014.
The National Association of Realtors reports the greatest price gains occurred in the West (+8.4%) while the Northeast saw a minimal increase (+1.8%). Homes in the South (+7.1%) and Midwest (+6.5%) also saw significant price increases.
Meanwhile, incomes rose only 2% during the same period.
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