Fed's Rate Hikes are Tanking the Mortgage Market
Source: American Banker
Rising interest rates are wreaking havoc in the mortgage market, forcing borrowers on the sidelines and making it tough for lenders to originate home loans.
Mortgage rates have doubled this year hitting an average of 6.94% last week, while home loan applications have fallen to their lowest level in 25 years. Credit availability is at its lowest level in nearly 10 years, according to the Mortgage Bankers Association. Mortgage rates now are so high that many lenders are losing money on loans they originate.
The MBA is predicting a 49% drop in total lending volume this year to $2.26 trillion from a year ago. Refinances are expected to plummet 74% to $671 billion while home purchases are expected to drop 14% to $1.59 trillion. The MBA forecast calls for a recession in 2023 with another 10% drop in home loan volume to $2.05 trillion. Lenders face a radically altered market after a long housing boom that brought a tsunami of refinancings, massive demand during the pandemic and years of surging home prices that have buoyed the economy.
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