U.S. mortgage rates climb toward 8% as loan activity shrinks

Across the country, mortgage application volume is shrinking – and Raleigh is no exception as first-time homebuyers get priced out.

The decline in mortgage applications continues as the 30-year fixed-rate mortgage averaged 7.79 percent for the week ending Oct. 26. “For the seventh week in a row, mortgage rates continued to climb toward 8 percent, resulting in the longest consecutive rise since the spring of 2022,” according to Freddie Mac.

At Coastal Federal Credit Union, Wendy Dawson, vice president of mortgage lending, said the credit union has seen a 10 percent decline in mortgage volume since last month, and a 23 percent dip from the same period last year.

“Some is the seasonality with the mortgage business, the primary impact is the rate environment,” Dawson said, describing it as “shutting out” first-time home buyers.

Across the nation, mortgage applications decreased 1 percent for the week ending Oct. 20, according to the latest numbers out of the Mortgage Bankers Association. Its purchase index decreased 2 percent that week and, when compared to the same week a year ago, dropped 22 percent.

According to the MBA, it was slowest weekly pace for mortgage activity since 1995.

Joel Kan, MBA’s vice president and deputy chief economist, pointed out that 10-year Treasury yields have climbed higher as global investors worry about the prospect for higher-for-longer rates.

“Mortgage rates followed Treasuries higher, with the 30-year fixed mortgage rate jumping 20 basis points to 7.9 percent- the highest since 2000,” Kan said.

It’s easy to see why bankers say people are being priced out of the market – as data show it can be cheaper to rent than buy in Raleigh. According to Zillow, the median rent in Raleigh is $1,825, while the median home value is $433,120. Crunch numbers with Bankrate’s mortgage calculator, and if you put 20 percent down on for a $433,000 home, monthly payments including taxes and homeowner’s insurance come to more than $2,800.

It’s not just homebuyers feeling the pinch. As a result of mortgage tightening, big banks have laid off workers this year. Wells Fargo (NYSE: WFC) disclosed it was dialing back its mortgage business. And other financial institutions have used the slowdown to update their systems, hoping better days are coming.

At Coastal Credit Union, the lower loan volume has allowed the credit union time to convert its core loan origination system, a “positive spin” in a bad situation, Dawson said.


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