A real estate agent comes out of a house for sale in Lancaster, Ohio.
Ty Wright | Bloomberg | Getty Images
Another week of rate hikes has spurred homeowners and buyers to withdraw from the mortgage market, and the trend is unlikely to change anytime soon.
The total volume of mortgage applications fell 5.1% last week from the previous week, 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 2.98% from 2.96% for loans with 20% down payment. That rate was 79 basis points higher than a year ago.
“Expectations of faster economic growth and inflation continue to push Treasury yields and mortgage rates up. Since reaching the low of the survey in December, the 30-year fixed rate has increased slowly and last week reached its highest level since November 2020, “said Joel Kan, associate vice president of economic and industrial forecasts at the MBA. The association began its weekly survey in March 1990.
Requests for refinancing real estate loans, highly sensitive to weekly interest rate fluctuations, fell 5% from the previous week, but were 51% higher than the previous year. That annual comparison, however, was twice as large just a few weeks ago, before rates went up. The refinancing portion of the mortgage activity decreased to 69.3% of total applications, from 70.2% in the previous week.
Mortgage applications for the purchase of a home fell 6% in the week and were 15% higher than in the previous year. Buying volume is falling less due to higher rates and more due to the record low stock of homes for sale.
Prices are also rising at the fastest rate in more than six years. The average purchase loan size reached another high of $ 412,200, partly due to higher house prices, but also due to a sharp drop in FHA loan applications. FHA mortgages, which offer a low down payment, are a favorite of first-time buyers at entry level. Stock scarcity is also more acute at the lower end.
Mortgage rates have continued to rise to begin this week, loosely following the 10-year Treasury yield. On Tuesday, mortgage rates rose at the fastest pace in several months.
“At one point, the market momentum becomes its own justification and bond prices snowball to ever lower levels,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “When bond prices fall, rates go up.”