he latest report from Black Knight, a financial company, talks about the mortgage market. They collected data until the end of July and found something important: mortgage interest rates went above 7%. This hasn’t happened since November 2022.
This change in interest rates had a big impact. It made it harder for people to afford mortgages, so fewer people were looking to get loans to buy homes. The report shows that the number of people locking in their mortgage rates decreased for the second month in a row. Most of these locks were for buying homes, and they went down by 7.4% compared to the previous month. Compared to last year, the number of people locking in rates to buy homes went down by 27%, and it’s 35% lower than before the pandemic.
People also aren’t refinancing their existing mortgages as much because of these higher interest rates. The report says that both types of refinancing—where you take out cash or just change the terms of the loan—have gone down by a lot. Cash-out refinancing is down 60%, and rate-and-term refinancing is down 31% compared to last year. In July 2022, interest rates were in the range of 5% to 5.9%.
Looking ahead, the report doesn’t have good news for refinancing. Only 3% of homeowners with mortgages have interest rates that are as high as the current rates or even higher. This means not many people will want to refinance their loans. The housing market has been going through a tough time with not enough homes for sale, and this recent increase in mortgage rates is making things even harder.
Despite the higher rates, people are still struggling to find homes because there aren’t enough available. So, even though the rates are stopping some people from buying, the bigger problem is not having enough homes to choose from.
Also, the report shows that getting a mortgage is becoming stricter. People have to put more money down when they buy a home, and the ratios between the loan amount and the home’s value are lower. People getting mortgages are also having higher credit scores. This means banks are being more careful about who they give loans to.
In the end, the report points out that the housing market is facing challenges. The high prices of homes are making it tough for people to buy, and the mortgage rates going up are making it even harder. But even with the higher rates, there’s still not enough supply of homes for all the people who want to buy. This is causing a sort of deadlock in the housing market.