There’s nothing like a rapid spike in mortgage rates to send a chill through the spines of both mortgage bankers and loan applicants alike. As loan officer Ed Irwin of Kirkland, Wash., put it: “I’m a one-man shop and probably six loans that I was working on are now not interested in proceeding.”
Kirkland, of Integra Real Estate and Mortgage, added, “No question, the rate increase just stopped my business cold.”
Just a few short weeks ago lenders were still doling out 30-year fixed-rate mortgages (to qualified applicants) at rates in the low 4s. But thanks to a jump in yields on the benchmark 10-year Treasury it would appear the day of the 4% (no points) mortgage is dead, at least for now.
For most of the year, low rates have resulted in a mini boomlet in refinancings. And not only have consumers refinanced once, some have refinanced twice.
All this has resulted in a decent year for the industry—a year in which home
purchases began to wane in late spring after the expiration of federal tax credits for first-time home buyers and certain move-up purchasers.
Over the past six months refis have accounted for about 80% of all new applications nationwide.
But with rates on the ascent, fear has set in, with some mortgage bankers wondering if the rate jump is something more permanent or merely a blip before another leg down.
“Business is definitely off,” said John Walsh, president of Total Mortgage Services, Milford, Conn., a nonbank lender that plies its trade in the Northeast and mid-Atlantic. “It was a real shock.”
But Walsh is also quick to point out that consumers may soon come around. “Sometimes these things take a while to adjust to.”
At press time, the 10-year was yielding 3.3%, down from last week’s high of 3.55%. According to TMS and other lenders, 30-year FRMs are now being offered at 4.75%.
“When you go from 3.99% and no points to 5%, they feel it,” said Walsh.
He added that oddly enough purchase applications are starting to pick up, something loan broker Marc Savitt of West Virginia is seeing as well.
“People will adjust,” said Savitt. “One thing consumers are starting to realize is how affordable these prices are (for homes). Even if rates go up a little it’s still a good time to buy.”
However, one negative trend he spotted in his market is homebuyers who are starting to walk away from foreclosure and short sales because the bank-owners are taking much too long to approve deals and clear the
paper work.
“People are just throwing up their hands and are starting to look at nonforeclosures,” he said.
Craig Cole, senior vice president of residential lending at Union Bank, San Francisco, a jumbo specialist, said the hike in rates hasn’t hurt his business, but added, “If rates continue to rise, it sure might.”
In Harrisburg, Pa., Angel Anile, president of Guardian Angel Mortgage Services, said some of her customers are now in a waiting mode.
“They told me that they will wait until the rates lower again before applying for a mortgage. It seems waiting is the consensus among all purchase and refinance borrowers.”
