Rising mortgage rates probably won’t slow the housing recovery because new families are being created and homes are still affordable, Wells Fargo & Co. (WFC) Chief Financial Officer Tim Sloan said.
“We don’t believe that the recent increases in mortgage rates are going to in any way, shape or form snuff out the housing recovery,” Sloan said today at an investor conference in New York. “When you look at any sort of statistics in the demographics in terms of household creation as well as household affordability, they are still very attractive and should drive a continued recovery in the housing business.”
The average rate on a 30-year fixed-rate mortgage has risen more than 1.2 percentage points since hitting a low of 3.35 percent in May, according to Freddie Mac data. That hasn’t slowed U.S. home prices, which rose 7.7 percent this year through June, according to an August report from the Federal Housing Finance Agency, Freddie Mac’s and Fannie Mae’s overseer.
The increase in mortgage rates has slowed refinancings, and the bank may originate about $80 billion in home loans in the third quarter, down 29 percent from the three-month period ended June 30, Sloan said. The San Francisco-based lender’s gain-on-sale margin, what it gets from selling loans to be packaged into securities and sold to investors, will fall to about 1.5 percent from 2.21 percent in the second quarter, he said.
Wells Fargo is the largest U.S. mortgage lender, originating about 1 in 4 home loans in the first half, according to Inside Mortgage Finance, a trade publication.
The bank slid 0.80 percent to $41.12 at 10:28 a.m. in New York. The shares jumped 21 percent this year through last week, compared with the 16 percent advance of the Standard & Poor’s 500 Index.