It is typical for the mortgage industry to be slow during the last week of the calendar year, but that wasn’t the case in 2022. In 27 years, activity had been at its lowest level.
A seasonally adjusted measure of mortgage applications for the week ending December 30 showed a decrease of 13.2% from two weeks earlier. (Holiday adjustments have been made to the results.)
That is due to higher costs for borrowers. It reflects the mortgage market’s reaction to tighter monetary policy by the Federal Reserve. As of December 30, the 30-year fixed-rate mortgage with conforming loan balances (less than $647,200) was estimated at 6.58%, up from 6.42% the prior week. During the same period, interest rates remained at 6.12% for jumbo loans (more than $647,200).
The beginning of 2023 marks a low point for lenders and loan officers, in anticipation of a recovery in the second half.
More Expensive Cash-outs
For the week ending December 30, MBA data showed that refinance applications declined 16.3% from two weeks ago.
This year, refis are expected to fall even further. Cash-out refinances, which many lenders still used in 2022, will be more expensive and harder to obtain in 2023 under the new rules.
A targeted increase in upfront fees for most cash-out refinance loans was announced by the Federal Housing Finance Agency (FHFA) in October. According to the agency, the implementation will begin on February 1, 2023, with the aim of minimizing disruption to markets and pipelines.
Additionally, starting on March 7, Freddie Mac has mandated that all proceeds from cash-out refis used to pay off first-lien mortgages must be seasoned for at least 12 months. Borrowers who buy a house, refinance with cash-out, or get a rate-and-term have to wait 12 months to get new cash-out.
Mortgage, Anyone?
Based on the MBA data, a 12.2% decrease in purchase applications compared with two weeks ago, and a 42% decrease from one year ago.
Realtor.com’s senior economist George Ratiu said that until investors have a better idea of the economy’s direction, financial market volatility will continue until 2023.
Housing affordability will remain at the top of the list of challenges this year with the Fed committed to monetary tightening until inflation moves toward 2%.
