https://sputnikglobe.com/20221006/high-interest-rates-coincide-with-hurricane-ian-causing-mortgage-applications-to-plummet-1101554466.html
High Interest Rates Coincide With Hurricane Ian, Causing Mortgage Applications to Plummet
High Interest Rates Coincide With Hurricane Ian, Causing Mortgage Applications to Plummet
Sputnik International
Within a week, mortgage applications plummeted by 14.2%, according to the Mortgage Bankers Association (MBA), and are down 37% compared to a year ago. At the... 06.10.2022, Sputnik International
2022-10-06T01:03+0000
2022-10-06T01:03+0000
2022-10-06T01:03+0000
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The housing market first began to cool in July of this year after houses were being sold at overvalued costs, some as high as 72%, during a housing boom that started during the COVID-19 pandemic. The market is now seeing some of the highest mortgage rates in more than 20 years because the Federal Reserve has “brought [it] to its knees”.The 30-year fixed rate has more than doubled in the past year and hit 6.75% last week, which is the highest rate since 2006, according to Joel Kan, the MBA’s associate vice president of economic and industry forecasting. Pearkes adds that the Federal Reserve shows no signs of “backing off” when it comes to hiking interest rates, so mortgage applications will continue to stall out.Hurricane Ian knocked down mortgage applications even further in Florida. Hurricane Ian was a Category 4 storm that hit Florida’s southwest coastline, destroying homes and infrastructure.Activity has increased in homebuyers looking for adjustable-rate mortgages. Adjustable-rate mortgages are a home loan with an interest rate that is not fixed, offers a lower initial interest rate, and is subject to change depending on movements in the housing market. The adjustable-mortgage rate sector increased to 11.8% from 8.5% a month ago.“With rates that high and housing prices as high as they've been, the affordability of mortgage payments is negligible. There’s almost nobody that can actually afford to transact in this housing market," Pearkes warned. "And the result is a complete collapse in demand for home purchases and therefore for mortgage loans.”
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High Interest Rates Coincide With Hurricane Ian, Causing Mortgage Applications to Plummet
Within a week, mortgage applications plummeted by 14.2%, according to the Mortgage Bankers Association (MBA), and are down 37% compared to a year ago. At the same time, refinance activity, such as those looking to trade in their current mortgage for a new one, has dropped by 18%.
The housing
market first began to cool in July of this year after houses were being sold at overvalued costs, some as high as 72%, during a housing boom that started during the COVID-19 pandemic. The market is now seeing some of the highest mortgage rates in more than 20 years because the Federal Reserve has “brought [it] to its knees”.
“The U.S. housing market is being brought to its knees by the Federal Reserve,” said George Pearkes, a macro strategist at Bespoke Investments. Pearkes estimates that mortgage applications will continue to fall by a further 10%.
The 30-year fixed rate has more than doubled in the past year and hit 6.75% last week, which is the highest rate since 2006, according to Joel Kan, the
MBA’s associate vice president of economic and industry forecasting. Pearkes adds that the Federal Reserve shows no signs of “backing off” when it comes to hiking interest rates, so mortgage applications will continue to stall out.
3 October 2022, 17:36 GMT
Hurricane Ian knocked down mortgage applications even further in Florida. Hurricane Ian was a Category 4 storm that hit Florida’s southwest coastline, destroying homes and infrastructure.
“There was also an impact from Hurricane Ian’s arrival in Florida last week, which prompted widespread closings and evacuations. Applications in Florida fell 31%, compared to 14% overall, on a non-seasonally adjusted basis,” explained Kan.
Activity has increased in homebuyers looking for adjustable-rate mortgages.
Adjustable-rate mortgages are a home loan with an interest rate that is not fixed, offers a lower initial interest rate, and is subject to change depending on movements in the housing market. The adjustable-mortgage rate sector increased to 11.8% from 8.5% a month ago.“With rates that high and housing prices as high as they've been, the affordability of mortgage payments is negligible. There’s almost nobody that can actually afford to transact in this housing market,"
Pearkes warned. "And the result is a complete collapse in demand for home purchases and therefore for mortgage loans.”
