Mortgage interest rates rose last week at the fastest pace in more than a year, throwing cold water at the already cooling demand.
The total volume of mortgage applications remained practically stable during the week, rising only 0.5% according to the seasonally adjusted index of the Mortgage Bankers Association.
The average contract interest rate for 30-year fixed rate mortgages with loan balances in compliance ($ 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 reduction of 20% Form of payment. The rate was 34 basis points lower a year ago, but this annual comparison has been steadily decreasing. Last fall, mortgage rates were 100 basis points lower compared to the previous year.
“Mortgage rates increased last week with market expectations of stronger economic growth and higher inflation,” said Joel Kan, associate vice president of economic and industry forecasts for the MBA. “The 30-year fixed rate experienced its biggest increase in a single week in almost a year, reaching the highest [level] since July 2020. “
Requests for refinancing a home loan, which are more sensitive to weekly rate changes, achieved a 0.1% gain for the week and were only 7% higher than a year ago. In comparison, the volume of refinancing in mid-December was more than 100% higher year after year.
The refinancing share of mortgage activity decreased to 67.5% of total applications from 68.5% in the previous week.
Mortgage applications for the purchase of a home increased by 2% in the week and were only 1% higher than a year ago. Home buyers are facing an expensive and lean real estate market as construction companies struggle to meet demand and potential sellers retreat. As mortgage rates rise, accessibility will weaken further, but it appears that more first-time buyers are venturing out.
“The housing market is entering the busy spring shopping season with strong demand. Purchase orders have increased, with an increase in government orders – probably first-time buyers – reducing the average loan size for the first time in six weeks.” said Kan.
Mortgage rates declined slightly earlier this week, with the 10-year Treasury’s yield falling. Mortgage rates follow this yield loosely.
“In the past two decades, there have been six months in which mortgage rates have risen by at least 50 basis points. February 2021 was one of them,” said Matthew Graham, COO of Mortgage News Daily. “In other words, it was a really bad month for rates – so bad, in fact, that it increasingly makes sense to seek some relief simply because things don’t tend to get that bad for so long.”