An ‘Open House’ sign is displayed as potential buyers arrive at a property for sale in Columbus, Ohio.
Ty Wright | Bloomberg | Getty Images
Record mortgage rates can now make headlines from the past.
Now, several weeks of rate hikes are eliminating the incredibly high demand for refinancing. This pulled the total weekly mortgage order volume down 1.9% last week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with loan balances in compliance ($ 510,400 or less) increased to 2.92% from 2.88%, with points increasing to 0.37 from 0.33% (including the origination fee) for loans with a drop of 20% Form of payment. The rate was 95 basis points higher a year ago.
The average 15-year fixed rate rose for the first time in seven weeks, to 2.48%.
With higher rates now offering less potential savings, refinancing requests for a home loan fell 5% in the week, but were 87% higher than in the previous year. That annual comparison had been over 100% last week.
“Market expectations for a larger-than-expected fiscal relief package, which is expected to further boost economic growth and reduce unemployment, have increased Treasury yields in the past two weeks,” said Joel Kan, associate vice president of MBA economic and industrial forecasts. “After a wave of post-holiday refinancing, higher rates have hurt demand for refinancing.”
Demand from home buyers, however, has increased despite higher rates. Mortgage applications for the purchase of a home increased by 3% in the week and were 15% higher than in the previous year. The coronavirus pandemic has spurred a strong demand for larger suburban homes. Despite the launch of the vaccine, this demand does not appear to be decreasing. The biggest hurdles for home buyers at the moment are high prices and record inventory of homes for sale.
“Home buyers in early 2021 continue to look for new and bigger homes,” said Kan. “The average loan size for purchase loans jumped to $ 384,000, the second highest level in the survey,” which dates back to 1990.
The new Biden government is preparing to take several actions in the real estate market that can favor both buyers and developers. Mortgage rates, however, started the week flat, as traders are likely to be waiting for the first big economic policy announcements before making any moves.