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October 2nd, 2013

How the government shutdown might affect your mortgage

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Capitol BuildingRates on the most popular types of mortgages declined again according to HSH.com’s Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages fell by 11 basis points (0.11 percent) to 4.38 percent. Conforming 5/1 Hybrid ARM rates decreased by only four basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average 3.27 percent.

“Mortgage rates have slipped to levels not seen in a few months,” said Keith Gumbinger, vice president of HSH.com. “While this is great news for mortgage shoppers, what’s not great is that it comes as the government has ground to a halt, making it hard for mortgage lenders to get verification of tax returns or even social security numbers. This is likely to slow the loan approval process.”

Borrowers involved in the mortgage process should discuss timelines and expectations with their lender, and inquire about longer commitments, longer rate locks and extension policies for each.

“If the government shutdown is only for a few days, it should be minimally disruptive,” adds Gumbinger. “Most loans are closed toward the end of the month, so a few days delay in getting documentation shouldn’t derail too many deals. However, if it persists for several weeks, disruptions and backlogs are likely to multiply.”

Refinance activity grows thanks to lower rates

If the shutdown last for more than a few days, we won’t start to see any impact on mortgage applications to at least next week.

According to the Mortgage Bankers Association, overall applications were down by just 0.4 percent during the week ending September 27. Not surprisingly, refinance applications were higher last week as mortgage rates have found additional room to fall following the Fed’s inaction last month.

Refinance applications increased by 3 percent last week, bring the share of refinance applications up to 63 percent of all mortgage activity, the highest mark since August.

Purchase applications saw a sizable decline of 6 percent from the previous week, while ARM continues to hover around 6 percent of total applications.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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