Source Realtor.com
BECAUSE THE FEDERAL RESERVE IS TAKING A HARD LINE ON INFLATION, MORTGAGE RATES ARE ALREADY GOING UP. HOMEBUYERS MAY NOT HAVE TO WORRY ABOUT HAVING TROUBLE GETTING HOME LOANS IN THE MONTHS TO COME.
The 30-year fixed-rate mortgage averaged 3.12 percent for the week ending December 16, up two basis points from the previous week, Freddie Mac said Thursday. This is an increase from the previous week. There is now a lot more money in the 30-year loan market than there was a year ago.
The 15-year fixed-rate mortgage, on the other hand, dropped by four points to 2.34 percent on average. The average rate on a 5-year Treasury-indexed adjustable-rate mortgage was 2.45 percent, unchanged from the previous week.
It looks like the Fed is going to put a lot less money into the mortgage market.
Mortgage rates have gone up this week, but this could be the start of a long rise. There is a lot more inflation than people thought, so the Federal Reserve is cutting back on its stimulus activities faster than people thought. In particular, the central bank said that it would cut back on its purchases of mortgage-backed securities (MBS) more quickly than previously thought.
Those purchases added a lot of money to the mortgage market, which made it easier for lenders to cut interest rates during the pandemic and start a huge refinance wave. Banks will have to do the opposite and raise interest rates if people don’t buy things.
Mike Fratantoni, the chief economist for the Mortgage Bankers Association, said that the Fed has been buying MBS “every single day, several times a day.” He said that over the last few years, the Fed has bought almost all of the new securities that were made.
A lot of other investors are expected to take over for them, but the market for these securities won’t be the same.
In Fratantoni’s words: “There are going to be other buyers, but there isn’t anyone else who acts like that.” Sometimes they’ll want to buy MBS, and sometimes they won’t.” That’s what makes us think that mortgage rates will be more volatile than they have been in the past few years.
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Mortgage rates could be affected by the Fed’s response to high inflation in other ways, too, so it’s important to pay attention.
It’s also planned that next year, the Fed will raise the interest rate on the federal funds rate three times. Mortgage rates aren’t directly affected by changes in the federal funds rate. Instead, they’re more likely to be affected by changes in long-term bond yields, such as the 10-year Treasury note. Even so, long-term investors still expect the Fed to raise interest rates, and that has an effect on mortgage rates.
In some cases, the central bank may have to take even more drastic steps because of how consumer prices react to the Fed’s tapering and rate rises. Even though the Fed is going to slow down the growth of its portfolio of mortgage-backed securities in the coming months, it will still need to buy more mortgage notes from time to time to keep that portfolio at the same size. This is because mortgage-backed securities can be paid off before their due dates if borrowers refinanced their loans or sold their homes.
They said that after the Fed finished tapering, it could still buy about $60 billion worth of mortgage-backed securities to keep its portfolio size the same. Central bankers might not want to see that happen, and they might instead choose to spend some of this money on Treasuries instead.
Banks that do this could lose a lot of money by cutting back on mortgage-backed securities, which aren’t always safe investments. However, such a move would make the mortgage market less available even more, so it would be bad.
The process of getting a mortgage may soon be easier.
Refinancing applications have already been slashed by a lot because of the rise in interest rates. That trend is expected to continue into the New Year. In 2021, the Mortgage Bankers Association says that lenders will have given out $2.32 trillion in refinance loans to people who want to buy or refinance their home. Next year, they say that the number of refinances will be down to just $860 billion.
It will then be important for the lenders who give out mortgages to look at applicants who need a loan to buy a home.
During this time when people are refinancing, lenders are looking for a lot of new customers. Investors who buy mortgage debt are still very much in a “risk-on” mode. As long as either of those things happens, there isn’t a clear reason for mortgage credit to get tighter.
Indeed, experts in the fields of economics and housing say that the opposite is more likely to happen. Most people think that lenders will try to make it easier for people to get a home loan so that they can compete for home buyers’ attention.
At first, lenders made it more difficult to get a mortgage. This would be a big change. lenders made it more difficult for people to get loans at that point because of the recession. They made it more difficult for people to get loans by making them have better credit scores and making them have more money. Because there were so many refinance applications, this was possible. They weren’t short on demand.
People who get low-down payment loans and flexible underwriting standards will likely be back in 2022, says Fratantoni. This could make it easier for a lot of people to get a loan, even if they are self-employed or work in the gig economy.
“The regulatory constraints are still pretty tight, so the ability-to-repay and qualified-mortgage standards really limit the amount of credit that can be given out,” he told the group.
In 2022, it will still be more expensive to buy a home than this year, even though the rate of home-price growth is expected to slow down.
In order to qualify for loans at higher interest rates, borrowers will have to be able to show that they can afford them. This will cut down on the number of people who can get loans.
Will Tampa Bay experience a Housing Crash in 2022?
The seller’s market won’t last forever. Signs are pointing to a gradual “slowdown” of the housing market here in the Tampa Bay area.
With the insane population growth, investors snapping up homes coupled with low inventory, it’s looking that a crash is unlikely in 2022. In fact, even with the federal reserve announcing that mortgage rates will increase by the summertime, it’s looking like home prices may remain the same, if not, a slower-paced incline in values.
If you’re looking to sell your home in 2022, starting your search for a qualified Florida realtor is in your best interest sooner rather than later.
As a Florida native having helped hundred of families sell their current homes, and buy their dream homes, I have the experience and knowledge to guide you through the selling process from “thinking of selling” to “closed”!