The increasing interest rates are slowing down mortgage applications and it is hurting the industry, says industry experts. The Fed is raising interest rates again today for the 15th time in three past 3 years and its effects on the housing and credit markets is starting to be felt. The Mortgage Bloggers are reporting that H&R Block is having to adjust its earnings due to a slowdown in its mortgage writing and Golden West and Ameriquest are both hurting.
The Mortgage Bankers Association’s index of applications to buy a home or refinance an existing loan declined 5.8 percent to 562.1 from 596.8. The group’s refinancing index fell 8.8 percent last week to 1427.4, the lowest since the week ended Dec. 23, from 1565.6.
The average rate on a 30-year fixed mortgage increased to 6.61 percent, the highest since June 2002. The five-year boom in housing will come to an end and weigh on the economy this year, economists forecast. Higher mortgage rates are slowing sales and refinancing, removing a source of cash for consumers.
“If mortgage rates continue to rise, then housing-related activity will drop further and eventually begin to subtract from economic growth,” said Steven Wood, president of Insight Economics LLC in Danville, California. via Bloomberg.com: U.S..
The only good thing that will come out of this for the mortgage companies is that the rising interest rates are forcing people out of their Adjustable Rate Mortgages into Fixed Rate Mortgages as the LIBOR rate has increased 2 percent and after the Feds actions today maybe more.
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