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Mortgage Applications Tapering Off a Bit as Rates Rise
Efforts by the Federal Reserve to push up long-term interest rates appear to have started taking hold in the primary mortgage market in recent weeks, with Freddie Mac reporting that 30-year fixed-rate loans were averaging 6.15% for the week ending Oct. 15.
The 30-year mortgage rate has been rising steadily since the beginning of September and crossed the 6% threshold on Oct. 13.
Interest on the fixed-rate mortgage last week was the highest it has been since the week ending July 1, 2004. Last year’s high was 6.34% in May.
“Although home sales were still impressive in September, mortgage applications in October seem to be tapering off a bit, due in large part to slowly rising interest rates,” said Frank Nothaft, Freddie Mac's chief economist.
“Obviously, refinancing is going to take the biggest hit as mortgage rates tick up,” he said. “Refinancing comprised about 40% or more of the total volume of mortgage originations over the last 13 months. This issue, however, will lessen as mortgage rates continue to rise.”
NAHB Chief Economist David Seiders said at the association’s recent forecast conference that he expects 30-year fixed-rate mortgages to rise to the 6.6% level next year. Economists at the conference predicted that the mortgage rate over the next two years will likely return to early 2002 levels, when they were about 7%.
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