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Rates for mortgages backed by Fannie Mae and Freddie Mac continue to ease as the Fed takes a breather from rate hikes, but homebuyers are paying more for jumbo mortgages that exceed the mortgage giants’ conforming loan limits.
Borrowers were locking rates on 30-year fixed-rate conforming loans at an average of 6.65 percent Tuesday, down from a 2023 high of 6.85 percent seen on May 26, according to the Optimal Blue Mortgage Market Indices.
That’s despite tough talk on inflation from Federal Reserve Chairman Jerome Powell, who warned lawmakers Wednesday that if the economy stays on its current course, the Fed will probably need to hike rates again and keep them elevated for some time.
It was essentially the same guidance Powell offered last week after Fed policymakers voted to skip a rate hike in June but keep the door open to future rate increases.
While rates on 30-year fixed-rate conforming mortgages have continued to retreat in the wake of last week’s Fed meeting, jumbo loans are another story. According to Optimal Blue data, rates on jumbo mortgages were averaging 7.2 percent Friday, a new 2023 high.
MBA Deputy Chief Economist Joel Kan said tighter liquidity conditions have prompted jumbo lenders to pull back, increasing rates in the process.
The MBA’s weekly survey of lenders showed applications for purchase mortgages were up by a seasonally adjusted 2 percent last week compared to the week before, but down 32 percent from a year ago.
Joel Kan
Kan said the increase in purchase loan demand was driven by a 2 percent gain in applications for conventional mortgages and a 3 percent increase in requests for FHA-backed loans.
“First-time homebuyers account for a large share of FHA purchase loans, and this increase is a sign that while buyer interest…