The Washington Post - USA (2021-10-23)

THE WASHINGTON POST

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SATURDAY, OCTOBER 23, 2021

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crease even further next year.”

The Mortgage Bankers Associ-

ation (MBA) is forecasting that

the 30-year fixed rate will in-

crease to 3.1 percent by the end of

2021 and 4.0 percent by the end of

2022.

“With inflation elevated and

the unemployment rate dropping

fast, the Federal Reserve will be-

gin to taper its asset purchases by

the end of this year and will raise

short-term rates by the end of

2022,” Mike Fratantoni, MBA’s

chief economist and senior vice

president for research and indus-

try technology, said in a state-

ment. “Mortgage lenders and bor-

rowers should expect rising mort-

gage rates over the next year, as

stronger economic growth push-

es Treasury yields higher.”

Meanwhile, new mortgage and

refinancing applications dropped

6.3 percent last week, according

to the MBA. The purchase index

decreased 5 percent and the refi-

nance index fell 7 percent from

the previous week. Refinancing

represented 63.3 percent of all

the applications, down from 63.9

percent the previous week.

“Refinance applications de-

clin ed for the fourth week as rates

increased, bringing the refinance

index to its lowest level since July

2021,” Joel Kan, MBA’s associate

vice president of economic and

industry forecasting, said in a

statement.

“Purchase activity declined

and was 12 percent lower than a

year ago, within the annual com-

parison range that it has been

over the past six weeks,” he added.

“Insufficient housing supply and

elevated home-price growth con-

tinue to limit options for would-

be buyers.”

One result of that, according to

the MBA, is year-over-year loan

applications for newly construct-

ed homes fell 16.2 percent in

September. The group attributes

the decline to higher building

material costs and labor shortag-

es, which drove up home prices.

[email protected]

adjustable rate average nudged

down to 2.54 percent, with an

average 0.3 point, from 2.55 per-

cent a week ago. It was 2.87

percent a year ago.

Mortgage rates have been at

historic lows — dipping periodi-

cally to below 3 percent — since

the Federal Reserve last year be-

gan purchasing $120 billion a

month in Treasurys and mort-

gage-backed securities to keep

the economy strong during the

pandemic. But those days could

be numbered with the Fed an-

nouncing that it will taper those

purchases and raise interest rates

soon to curb inflation.

Inflation in the United States

has reached a 13-year high of 5.4

percent annually, according to

the government, evidenced by

higher prices for homes, cars,

energy, food and other goods.

“The economy continues to

grow, inflation is running hot,

and the Federal Reserve is about

to begin paring their bond pur-

chases that have helped keep

mortgage rates low,” said Greg

McBride, senior vice president

and chief financial analyst at

Bankrate.com.

“Inflation is really going to be

the key ingredient going for-

ward,” McBride said. “If inflation

is stubbornly high, mortgage

rates will go up. If inflation is

transitory, it will keep a lid on

mortgage rates.”

“Mortgage rates continued to

rise this week due to the trajecto-

ry of both the economy and the

pandemic,” Sam Khater, Freddie

Mac’s chief economist, said in a

statement. “Even as the availabili-

ty of existing homes is improving,

prices remain high due to home

buyer demand and limitations on

housing starts and permits re-

sulting from the ongoing labor

and material shortages. Despite

these countervailing forces, we

expect the housing market to

remain strong as we head into the

end of the year.”

The National Association of

Realtors (NAR) on Thursday re-

ported that the median existing-

home sales price climbed 13.3

percent to $352,800 from Sep-

tember 2020 to September 2021.

Moreover, existing-home sales in-

creased 7 percent in September

after having dipped in August.

“Some improvement in supply

during prior months helped

nudge up sales in September,”

Lawrence Yun, NAR’s chief econo-

mist, said in a statement. “Hous-

ing demand remains strong as

buyers likely want to secure a

home before mortgage rates in-

JUSTIN SULLIVAN/GETTY IMAGES

Packages of chicken are displayed on a shelf at a Saf eway store in San Francisco earlier this month.

Americans are seeing higher prices for food, homes, cars, energy and other goods.

Source: Freddie Mac

Weekly averages for

popular mortgage types

2.33

THE WASHINGTON POST

5%

4

3

2

1

’19 ’20 ’21

3.09

30-YEAR FIXED

15-YEAR FIXED

5-YEAR ARM

2.54

BY HARRIET EDLESON

Mortgage rates are continuing

to climb, according to data by

Freddie Mac released Thursday,

driven largely by rising inflation

resulting from high demand and

shortages of goods across the

economy.

The 30-year fixed-rate average

rose to 3.09 percent with an aver-

age 0.7 point, up from 3.05 per-

cent last week and 2.80 percent a

year ago. (A point is a fee amount-

ing to 1 percent of the loan paid to

a lender that is in addition to the

interest rate.)

The 15-year fixed-rate average

increased to 2.33 percent with an

average 0.7 point, up from 2.30

percent a week ago. It was 2.33

percent a year ago. The five-year

Mortgage Rates

Rates

rise amid

inflation

concerns

Home prices also

climbed about 13 percent

over the past year

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