FILE PHOTO: New townhomes are seen in a subdivision with other nearby homes that are under construction in Tampa, Florida, U.S., May 5, 2021. REUTERS/Octavio Jones
October 20, 2021
(Reuters) – Interest rates on the most popular type of U.S. home loan shot to a six-month high last week as global rates continued their march higher against a bout of stiff inflation and expectations that central banks will back further away from their pandemic-era easy-money policies.
The contract rate on a 30-year fixed rate mortgage climbed to 3.23% in the week ended Oct. 15 from 3.18% the week before, the Mortgage Bankers Association reported on Wednesday in its weekly survey of conditions in the U.S. home lending market. That was the highest level since early April and is up by more than a quarter percentage point since the end of July.
The increase in rates helped drive overall mortgage-application volumes down by 6.3% to the lowest since July, led by a 7.1% drop in refinancing applications, the MBA said. Refinancing application volumes are also at their lowest since July, just fractionally above their lowest levels since early 2020.
Applications for loans to buy a home fell 4.9% to the lowest since early September.
Graphic: Mortgage rates on the rise, https://graphics.reuters.com/USA-ECONOMY/MBA/akpezaxqzvr/chart_eikon.jpg
“Purchase activity declined and was 12% lower than a year ago,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Insufficient housing supply and elevated home-price growth continue to limit options for would-be buyers.”
How quickly that situation is resolved remains the big unknown in the U.S. residential real estate market. On Tuesday, the Commerce Department reported that U.S. homebuilding unexpectedly fell in September and residential construction permits dropped to a one-year low amid acute shortages of raw materials and labor.
Meanwhile, global interest rates continue to grind upward as central banks like the U.S. Federal Reserve signal the days of crisis-era accommodation are nearing their end in the face of inflation rates running at their highest in decades due to supply bottlenecks and labor shortages.
The Fed is broadly expected at its next meeting in two weeks to announce plans to start scaling back its purchases of $120 billion a month of U.S. Treasuries and mortgage-backed securities as a first step toward a normalization of policy.
The yield on the 10-year U.S. Treasury note, the most influential benchmark security in determining mortgage interest rates, hit its highest since May on Wednesday and has climbed nearly half a percentage point since late July.
(Reporting by Dan Burns; Editing by Andrea Ricci)
Source: One America News Network
