Mortgage Refinancing Demand Drops 20% As Rates Rise to a 10-Month High

Mortgage rates rose again last week, prompting homeowners and prospective home buyers to reduce their loans.

The total volume of mortgage applications decreased 5.1% from the previous week, according to the seasonally adjusted index from the Mortgage Bankers Association.

Average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($ 548,250 or less) increased to 3.36% from 3.33%, with points increasing to 0.43 from 0.39 (including the origination fee) for loans with a 20% discount. pay.

As a result, applications to refinance a home loan, which are more sensitive to weekly rate movements, fell 5% during the week and were 20% lower than a year ago. That’s the slowest pace since last June.

“Refinancing applications declined for the fifth week in a row, but there was an increase in VA credit activity,” said Joel Kan, MBA economist. “In general, the demand for refinancing has decreased, and the volume during the last 10 weeks is down more than 30%.”

Mortgage applications to buy a home fell 5% during the week and were 51% higher than a year ago. That yearly comparison will be very big for the next several months, as the housing market almost completely stalled last year at this time, when the pandemic shut down the economy. He recovered dramatically at the beginning of the summer.

“The rapidly recovering economy and improving labor market are generating significant demand for home purchases, but activity in recent weeks has been limited by faster house price growth and extremely low inventory,” he said Khan.

Mortgage rates have moved lower this week after refusing to exceed recent highs. This could bode well for home buyers in the coming weeks.

“Evidence of a supportive shift in the rate environment is beginning to accumulate,” wrote Matthew Graham, chief operating officer for Mortgage News Daily. “The change could be disappointing or short-lived, it’s true, but almost anything is better than the first quarter of 2021. Just drifting sideways at current levels would be a huge win.”


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