Mortgage fixes on the rise amid market uncertainty

Mortgage lock-in transaction volume increased about 7% in May as borrowers addressed the following issues: Continuing interest rate fluctuations.

Mortgage locks in May rose sharply to 6.78% from 1.87% in April, according to secondary market services provider Mortgage Capital Trading Ltd. On a year-on-year basis, the amount of mortgages locked last month also increased by 19.84%.

By loan type, interest rate and term refinances increased 18.21% month-on-month, cash-outs increased 4.99%, and purchase-fixed increased 6.54%.

Mortgage borrowers continue to face unpredictable interest rate fluctuations, with rates trending higher again this spring. The end of 2023 forecast offered a ray of hope to investors and a struggling lending market, and the optimistic outlook pushed rates lower in the first quarter. Hopes dashed This comes as released economic data showed inflation will continue for longer than expected.

The Federal Reserve regularly cites a 2% inflation rate as a reason to cut the benchmark lending rate between banks – the federal funds rate that lenders influence when setting interest rates. Inflation rose to 3.4% in April and May figures are due to be released on June 12.

“The next two months will be important from a data perspective as the Fed looks to see inflation trending toward its 2% target,” Andrew Rose, senior director and head of trading at MCT, said in a press release.

The mortgage market has been volatile over the past two years. Data including the May government employment report showed that: There are more questions than answers When the Federal Reserve might take action to increase market certainty.

“Given the nonfarm payroll numbers just released, it will take more time to determine a trend,” Rose said.

After dropping below 7% from January through March, 30-year fixed rates have been climbing back above that level since April, according to Freddie Mac’s weekly primary mortgage market survey. They dropped in May but rose back above that threshold in early June.

While lenders experienced an increase in fixed transaction volume, the pace of growth in May slowed compared to the start of 2023, when interest rates were declining. January saw an increase of almost 14%, while February and March recorded increases of around 27% and 15%, respectively.

On the other hand, Optimal Blue A similar spring pattern has been reported previously, with rate fixes rising further in April, increasing 11% month-on-month compared to MCT figures. The annual increase in purchase fixes was the first in more than two years and could be a sign that buyers are returning to the market.

The Mortgage Bankers Association’s number of purchase applications for May showed new lending was down overall.