A sharp rise in mortgage interest rates in recent weeks is weighing on mortgage demand. Total application volume fell nearly 7% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contractual interest rate for 30-year fixed rate mortgages with compliant loan balances ($ 548,250 or less) fell from 3.10% to 3.14%, with points dropping from 0, 35 to 0.35 (including origination fee) for loans with a 20% drop in payment. This is the highest level since July.
Refinancing demand, particularly sensitive to weekly fluctuations in interest rates, fell to its lowest level in three months, down 10% last week from the previous week. The volume was 16% lower than the same week a year ago.
“The higher rates reduce the incentive for borrowers to refinance, as declines have been observed for all types of loans,” said Joel Kan, associate vice president of economic and industrial forecasting at MBA.
Mortgage applications for the purchase of a home fell 2% for the week and were 13% lower than the same week a year ago. It was driven by a drop in requests for conventional loans. Government loans, which are mainly used by low-income borrowers, saw a 1% increase in demand.
“But that was still not enough to bring the average loan balance down by $ 410,000. With home prices appreciating and selling prices remaining very high, demands for higher balances, conventional loans dominate. always the mix of activities, ”added Kan.
Rates dropped slightly at the start of the week, but then rose again on Tuesday. The bond market, which dictates the daily movement of rates, reacted to the economic data.
“After a major services sector report came out stronger than expected, bonds continued to deteriorate,” said Matthew Graham, chief operating officer at Mortgage News Daily. “When bonds lose enough ground in the middle of a trading day, mortgage lenders sometimes make mid-day adjustments to their rate offers.”