Analysis from the Federal Housing Finance Agency finds that, while U.S. mortgage rates are not historically high, the gap between the rates existing homeowners are paying and would-be home buyers are facing has reached a point not seen in decades.
The result is a “lock-in effect” that’s keeping the housing supply extremely tight, a problem that President Joe Biden’s proposed subsidies are unlikely to fix.
The findings are in a March 2024 working paper entitled “The Lock-In Effect of Rising Mortgage Rates” by Ross M. Batzer, Jonah R. Coste, William M. Doerner, and Michael J. Seiler.
“People can be ‘locked-in’ or constrained in their ability to make appropriate financial changes,” the authors write, pointing to obstacles like “being unable to…
Faced with inflation pressure and rising rates, many borrowers are seeking lower monthly mortgage payments in the form of ARMs or longer terms. But lower monthly payments come with a price. LendingTree analyzed 380,000 loans to determine how much more borrowers with 30-year loans pay than those with 15-year loans. They found that borrowers with 15-year fixed rate mortgages saved an average of $215,000 in interest across the loan’s lifetime. Of course, 15-year loans also required borrowers to pay an average of $572 more a month in order to rack up those savings. One reason shorter-term loans save borrowers so much money is that their interest rates are typically lower. The 30-year fixed rate averaged 5.89% last week, while the…
Mortgage loan application volume rose 2% last week, the Mortgage Bankers Association’s (MBA) weekly survey reported. The seasonally adjusted Market Composite Index, a measure of mortgage loan application volume, rose 2%. The seasonally adjusted purchase index fell 5%, while the unadjusted purchase index rose 28% and was 8% lower YOY. The share of refinance applications rose 9% and was down 37% YOY. Refinances made up 53.9% of total applications, up from 59.4% the previous week. The report noted that mortgage rates fell after rising for several weeks, which resulted in the surge of refinances. “While the 30-year fixed mortgage rate and 15-year fixed mortgage rate both declined only one basis point, the FHA rate fell 7 basis points, driving the…