People interested in buying a house and getting a mortgage played a version of beat the clock ahead of the anticipated interest rate increase coming from the Federal Reserve on Wednesday afternoon.
The Fed is expected to sharply raise its key short-term rate – a third straight three-quarter-point hike is likely to be announced – as its previous rate hikes are being felt by households across the economy.
The Fed’s latest move is expected to raise its benchmark rate to a range of 3% to 3.25%, the highest level in 14 years.
“Treasury yields continued to climb higher last week in anticipation of the Federal Reserve’s September meeting, where it is expected that they will announce – in their efforts to slow inflation – another sizable short-term rate hike, said Joel Kan, the Mortgage Banker’s Association’s associate vice president of economic and industry forecasting. “Mortgage rates followed suit last week, increasing across the board, with the 30-year fixed rate jumping 24 basis points to 6.25 percent – the highest since October 2008.”
Ahead of the Fed’s move, overall demand for a mortgage application rose 3.8% compared with the prior week, according to the weekly survey from the MBA.
“As with the swings in rates and other uncertainties around the housing market and broader economy, mortgage applications increased for the first time in six weeks but remained well below last year’s levels, with purchase applications 30% lower and refinance activity down 83%,” added Kan. “The weekly gain in applications, despite higher rates, underscores the overall volatility right now as well as Labor Day-adjusted results the prior week.”
Refinancing also jumped as that area’s index increased 10%.
The seasonally adjusted Purchase Index increased 1% from one week earlier.
The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.