Higher interest rates are expected to follow a downgrade of the nation’s debt or an outright default.
“If the country did default, we definitely assume rates will skyrocket at that point,” said Mona Marimow, a spokeswoman for Lending Tree, an online lender.
But that threat doesn’t appear to have borrowers rushing to get a mortgage.
Official statistics and anecdotal reports from mortgage lenders show no big push to get loans completed or interest rates locked in as the Tuesday deadline to lift the nation’s debt ceiling approaches.
“We are not seeing the mortgage market react pre-emptively. Consumers are not rushing out to take action,” Marimow said.
Wells Fargo, the nation’s largest mortgage lender, isn’t seeing more requests for loans or more inquiries about locking in interest rates in Colorado, said spokeswoman Cristie Drumm.
Mortgage activity the past few weeks has followed the trend seen all summer — steady, said Jerry Kaplan, vice president of capital markets at Cherry Creek Mortgage in Denver.
But the firm has seen more requests to lock in interest rates, he said.
Mortgage rates were little changed the past week, according to a weekly survey from Freddie Mac. Rates on a 30-year loan were averaging 4.55 percent for the week ended Thursday, up from 4.52 percent the previous week.
The Mortgage Bankers Association tracks mortgage applications weekly and they have decreased in five of the past six weeks from the previous week.
Refinance applications for the week ended July 22 were down 5.5 percent from the previous week, while purchase applications were down 3.8 percent.
“The difficulty with mortgage applications is that tighter lending standards, falling home prices, and an overhang of houses relative to the number of households is keeping home purchases depressed,” said economist Steven Wood.
Those who could refinance at low rates most likely already did so, while those who couldn’t, say because their homes had lost too much value, still can’t, he said.
Given a report Friday that showed the U.S. economy was weaker than expected, rates could fall, especially if a last-minute deal is struck, Kaplan said.
What worries him more than a spike in interest rates is the possibility of furloughs at government agencies vital to getting mortgages made — from the Internal Revenue Service to the Federal Housing Administration.
“Can we insure those loans and make them sellable on the secondary market?” he asked. “There is a lot of government interaction.”
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
