The most recent uptick in interest rates is influencing originators to prioritize home purchase loans, rather than refinances.
Thirty-year fixed rate mortgage rates spiked to 3.45% last week, the first time in six weeks.
Rather than merely a fluctuation, this is signaling a longer-term rise in interest rates – one that might slowly be bringing the refinancing boom to an end.
Interest rates are expected to rise as much as one full point during the year, and two points over the next several years. This will put a significant dent in the refinance market, which has made up more than 70% of all originations recently, according to Bill Bent, executive vice president of Academy Mortgage in Sandy, Utah.
“We are prioritizing the purchase market in today’s environment,” Bent said.
Rates going up is actually a benefit for the purchase market, said Frank Mancino, branch manager for Gateway Funding in Hamilton, New Jersey. When potential borrowers see rates going up, they want to hurry in before rates go higher.
When rates fluctuate, it “encourages borrowers to buy now and now is always the best time to buy, regardless,” Mancino said.
Eddy Perez, president of Equity Loans, says that he expects rates to rise so long as the economy is improving.
In some cases, refinances will still make sense, but the opportunity currently lies in home purchases, he said.