Mortgage rates in the U.S. were unchanged, with the 30-year average close to a two-year high, as fewer homeowners sought to refinance.
The average rate for a 30-year fixed mortgage held at 4.57 percent, Freddie Mac said in a statement today. The average 15-year rate remained at 3.59 percent, according to the McLean, Virginia-based company.
A jump in borrowing costs from near-record lows in early May has reduced affordability for would-be buyers and discouraged homeowners from applying to lower their monthly payments. While applications for purchase loans dropped 17 percent in the past four months, the decline was 71 percent for a measure of refinancing, according to data from the Mortgage Bankers Association released yesterday.
“The biggest impact of higher rates, by far, is the decline in refinancing,” Jed Kolko, chief economist at San Francisco-based property-listing service Trulia Inc. (TRLA:US), said yesterday in a telephone interview. “We had two months of big rate spikes, both May and June, and rates have continued to climb, though not as steeply, since June. Altogether, that should keep pushing refinancing activity down.”
August’s data may show the biggest decline in home sales since rates have climbed, Kolko said. Refinancing applications historically have dropped sharply immediately after a rate spike and purchases have fallen three months later, according to his analysis.
“The impact of rising rates on home sales is nowhere near as dramatic as the impact of rates on refinancing,” Kolko said.
Lenders are paring staff and tempering profit forecasts as mortgage demand declines. Bank of America Corp. said this week it’s cutting 2,100 jobs and closing 16 offices by Oct. 31. Wells Fargo & Co., the top U.S. home lender, said third-quarter originations may fall 29 percent, and JPMorgan Chase & Co. said it expects to lose money on home lending in the second half of the year.
The 30-year fixed mortgage rate has climbed from 3.35 percent in early May as the Federal Reserve signals it may pare its stimulus efforts. It rose to a two-year high of 4.58 last month. The rate is less than the average of about 6.3 percent for the past 20 years, data compiled by Bloomberg show. The 20-year average for a 15-year loan is about 5.8 percent.
“The bigger picture is that the cost of credit, even at today’s slightly higher rates, is historically very low,” Paul Diggle, property economist at Capital Economics Ltd. in London, said in a research note yesterday. “Higher rates will slow, but not derail, the recovery in housing market activity.”
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