Demand for Mortgage Applications Stalls as Interest Rates Rise


Mortgage interest rates rose last week at the fastest pace in more than a year, cooling demand.

Total mortgage application volume was mostly flat during the week, increasing just 0.5% based on the seasonally adjusted index from the Mortgage Bankers Association.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($ 548,250 or less) increased to 3.23% from 3.08%, with points increasing to 0.48 from 0.46 (including the origination fee) for loans with a 20% discount. payment. The rate was 34 basis points lower a year ago, but that annual comparison has been steadily declining. Last fall, mortgage rates were 100 basis points lower compared to the previous year.

“Mortgage rates skyrocketed last week due to market expectations for stronger economic growth and higher inflation,” said Joel Kan, MBA associate vice president for economic and industry forecasting. “The 30-year fixed rate experienced its largest weekly increase in almost a year, reaching the highest [level] since July 2020 “.

Applications to refinance a home loan, which are more sensitive to weekly rate movements, managed to make a gain of 0.1% during the week and were only 7% higher than a year ago. By comparison, refinance volume in mid-December was more than 100% higher year-over-year.

The refinancing share of mortgage activity decreased to 67.5% of total applications from 68.5% the previous week.

Mortgage applications to buy a home increased 2% during the week and were only 1% more than a year ago. Home buyers face an expensive and tight housing market as builders struggle to keep up with demand and potential sellers back out. As mortgage rates rise, affordability will weaken further, but it seems more first-time buyers are venturing out.

“The housing market is entering the busy spring shopping season with strong demand. Requests for purchases increased, with an increase in government applications, likely first-time buyers, reducing the average size of first-time loans. once in six weeks, “Kan said.

Mortgage rates fell a bit to start this week, as the yield on 10-year Treasuries fell. Mortgage rates loosely track that performance.

“In the past two decades, there have been six months in which mortgage rates increased by at least 50 basis points. February 2021 was one of them,” said Matthew Graham, chief operating officer of Mortgage News Daily. “In other words, it was a really bad month for rates – so bad, in fact, that it makes more and more sense to seek some relief simply because things don’t tend to stay that bad for that long.”

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