Back from the break in rising rates

Rates on the rise, while lock volume declines

After last week’s quick break from rising rates, we’re back to our regularly scheduled programming as we begin to see rates tick back up. New numbers on Tuesday, October 11, 2022, showed a 0.25% increase on the average rate for a 30-year fixed rate mortgage—coming in at 7.10%. Meanwhile, lock volumes were down 10% from August and 60% from last year. This is due in large part to a 26.2% drop in cash-out refinance locks from the month prior, which is 78% lower than the same time last year. While record-low rates drove record-high refinancing numbers, recent data shows 90% of all active first-lien mortgages have current rates below 5%, leaving little room for homeowners interested in refinancing and driving September’s new refinance share low of 16%.

The credit availability concern

After falling for the seventh consecutive month in September, mortgage credit availability hit its lowest level since March of 2013. That means there are fewer potential homebuyers who are able to qualify for a mortgage.

As the Federal Reserve continues to increase rates to combat high inflation, economists predict a potential recession, leaving lenders concerned that a weaker economy could lead to more people defaulting on their mortgages. This combination of higher rates and harder-to-qualify-for loans has some homebuyers retreating to the sidelines.

The fight against inflation

Last month, the Fed raised benchmark interest rates in reaction to rising inflation, while indicating rate hikes would continue above the current 3% to 3.25% range. Experts warn that while this can help to tame inflation, these higher rates also have the potential to increase the chance of recessions in wealthy nations and debt crises in poorer ones.

The International Monetary Fund previously predicted the global economy would grow 3.2% in 2023, but now anticipates that to slow to 2.7%, explaining they expect a third of the global economy to be in a “technical recession” (defined as an economy that declines for two consecutive quarters).

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