Mortgage standards don’t appear to be budging, even though over the third quarter of 2013 we have seen interest rates rise, causing fewer refinances and a lower demand for mortgages.
The Federal Reserve conducted a survey over the first half of October, of federal loan officers in 73 domestic banks and 22 international branches, in regards to a 1% rise in interest rates for a 30 year fixed mortgage in 3Q13.
The survey found that 80% of banks did not adjust their credit standards at all, while 15% of banks admitted to lowering their standards slightly.
Erik Johnson, senior U.S. economist at IHS Global Insight shared, “Easier credit conditions, more generally, are helping the economic recovery, but what’s concerning is that lending standards for residential mortgages have not improved much since tightening dramatically during the crisis.”
Additionally, 30% of the banks surveyed reported that mortgage applications remained fairly consistent from the 2Q13 – 3Q13. 40% reported a decline in the 2Q13 before interest rates began to rise, and 90% of the banks surveyed said they all say a noticeable decline in refis from 2Q13 to 3Q13.
Even with increased marketing budgets, faster approval times, lowering fees and down payment requirements, banks have not seen the activity improve.
It is a toss-up on the opinions on whether activity will increase in the 4Q13 or continue to decline into 2014. So if you are a buyer and have been waiting for the right time, and possibly got spooked by the recent rising rates, this may be the time to get your toe out of the water and dive in, while the water is still warm.