It is a double blow for would-be home buyers. It is getting harder to get a loan because interest rates are going up.
According to Mortgage News Daily, the average rate on the 30-year fixed mortgage is expected to hit 7.25′′ on Tuesday. For the last few days, it has been over 7%.
The last time mortgage credit availability was this low was when housing was in a slow recovery from the financial crisis. In September, it fell for the seventh month in a row, down 5.4% from August.
As mortgage demand decreases due to higher rates, they are more concerned about a weaker economy, which could lead to higher delinquencies. Executives and economists warn that the U.S. could fall into a recession as the Federal Reserve hikes rates.
According to a release, there was a smaller appetite for lower credit score and high loan-to- value programs.
Mortgage delinquencies are close to a record low. Black Knight said that new foreclosures rose 15% from July to August, but were still below pre-pandemic levels.
Due to higher home prices, more borrowers have to use jumbo loans, which have fallen in credit availability. More borrowers are choosing to take out a mortgage with a lower interest rate because of higher prices. The rates can be fixed for up to 10 years.
The borrowers are worried that mortgage rates will go up. Mortgage rates don't follow the federal funds rate exactly but they are influenced by the Fed's policy
Matthew Graham wrote on his website that the Fed is determined to hike rates as high as it can and keep them there as long as it can.
The Fed doesn't consider mortgage rates or the housing market because home prices are too high.
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