Banks Showing Stability, While Mortgage Rates Rise
The Federal Reserve has had to weigh multiple economic concerns throughout the first five months of 2023
- Written by Banking Exchange staff
The Federal Reserve has had to weigh multiple economic concerns throughout the first five months of 2023, including a potential banking crisis as a number of midsize banks struggled with deposits. Rising interest rates could potentially hurt the stability of banks, but at the same time could be necessary to fend off inflation according to economists.
Ironically, the relative calm over the past two weeks in the banking industry has allowed for interest rates to rise past its highs in March with the 30 year fixed mortgage escalating over 7%. The debt ceiling threat also did the mortgage industry no favors this week. The rates were already heading higher last week.
The effect on mortgage applications has already been seen with applications dropping by more than 4% week over week. Refinancing applications fell even further week over week down about 5% and down almost half on a year over year basis. The mortgage rates on the most popular fixed mortgage is more than 1.5% higher than at this time in 2022.
In the meantime, banks have become more selective when it comes to mortgage applications due to bank issues since March. While the rates are close to decade highs, there is little reason for them to fall significantly over the next few months unless the Federal Reserve sees optimistic signs that inflation has been managed. Still, in the nation’s largest markets, the real estate industry has not seen significant declines in home value.
The stock market has continued to slide almost entirely due to debt ceiling anxiety.
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