Interest rates on mortgage lending rose slightly, reminiscent of the time of easy money Mortgages are likely to end sometime.
The 30-year fixed-rate mortgage averaged 4.20% for the week ended April 25, Freddie Mac said Thursday. That rose by three basis points during the week, marking the fourth weekly increase for the popular product. The 1
The 5-year variable rate mortgage, traded on the Treasury Index, averaged 3.77%, one basis point lower.
These rates do not include any fees associated with obtaining mortgage loans.
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Fixed income mortgages follow the benchmark's 10-year US Treasury bond
TMUBMUSD10Y, + 0.46%
which has risen in recent weeks. A series of strong economic data has convinced investors that the economic downturn was temporary at the beginning of the year and that economic expansion still has its legs. This has made assets like stocks more attractive and fixed income assets like bonds less so.
In the real estate market conditions are still tense. In March, the supply of homes declined and was well below the long-term average. The specter of rising interest rates has led to more and more Americans applying for a mortgage: In recent weeks, claims have reached a nine-year high, according to the Mortgage Bankers Association.
However, credit standards will become somewhat stricter.
Last month, the Federal Housing Administration said it would start requiring manual underwriting for mortgages that could be riskier. The agency, which guaranteed around 23% of new mortgages in 2018, is concerned about borrowers whose credit is higher alongside higher debt ratios.
During the real estate bubble a decade ago, so-called "risk layering" was common, even encouraged. In the spotless credit environment that emerged after the financial crisis, lenders were more cautious. But the meager supply has driven home prices so high, even though stagnant wages and higher student debt have made home ownership a challenge for many Americans, especially the younger ones.
The industry has responded by gradually opening the credit field and using mortgage market jargon to try to give more consumers access to home loans. The graph above shows how the average FICO score in Ginnie Mae's mortgage portfolio has fallen. These include loans made through FHA, VA and several other smaller programs.
"Manual underwriting is more labor-intensive and costly for lenders," Urban Institute analysts recently commented. The think tank's Housing Finance Policy Center has called for a relaxation of strict credit standards following crises.
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"It's too early to say whether this will discourage lenders from taking the affected mortgages In the coming months, we will monitor the credit features of new FHA origins to determine the impact of this change on the availability of credit. "
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