Mortgage rates have been on a tear this month, rising yet
again last week to the highest level in eight months, according to the Mortgage
Bankers Association. That caused mixed demand for mortgages last week,
resulting in no change from the week before.
The average contract interest rate for 30-year fixed-rate
mortgages with conforming loan balances ($548,250 or less) increased to 3.30%
from 3.23%, with points decreasing to 0.34 from 0.35 (including the origination
fee) for loans with a 20% down payment. That rate was 30 basis points lower one
As a result, refinance demand fell 2% week to week,
seasonally adjusted. Volume was 26% lower than the same week one year ago. The
refinance share of mortgage activity decreased to 62.2% of total applications
from 63.3% the previous week.
“The increase in rates triggered the fifth straight decrease
in refinance activity to the slowest weekly pace since January 2020. Higher
rates continue to reduce borrowers’ incentive to refinance,” said Joel Kan,
MBA’s associate vice president of economic and industry forecasting, in a
Mortgage applications to purchase a home increased 4% for
the week but were 9% lower than the same week one year ago. As home prices
continue to rise, and most of the sales are in higher price tiers, the average
loan size rose to its highest level in three weeks.
“Both new and existing-home sales last month were at their
strongest sales pace since early 2021, but first-time home buyers are
accounting for a declining share of activity,” added Kan.
The latest read on home prices from S&P Case-Shiller
showed prices up nearly 20% nationally, but the annual gain, which has been
rising steadily for the past year, did not change from the previous month. That
could be a sign that higher mortgage rates are taking at least a little bit of
the heat out of prices.
Mortgage rates edged down slightly to start this week, but
that could just be a brief reprieve before next week. The Federal Reserve is
widely expected to announce next Wednesday that it will taper its purchases of
mortgage-backed bonds. That should send rates even higher.
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