Last week, mortgage interest rates rose at the fastest pace in a year, throwing cold water into demand that was already cooling.
The total volume of mortgage applications was essentially flat during the week, rising just 0.5% according to the seasonally adjusted Mortgage Bankers Association index.
The average contract interest rate for 30-year fixed-rate mortgages with compliant loan balances ($ 548,250 or less) rose to 3.23% from 3.08%, with points rising to 0 , 48 from 0.46 (including home commission) for loans with a 20% reduction payment. The rate was 34 basis points lower a year ago, but this annual comparison has steadily declined. Last fall, mortgage rates were 100 basis points lower compared to the previous year.
“Mortgage rates rose last week on market expectations of stronger economic growth and higher inflation,” said Joel Kan, associate vice president of economic and industrial MBA forecasts. “The 30 – year fixed rate experienced its biggest one – week increase in almost a year, peaking [level] since July 2020 “.
Applications to refinance a home loan, which are more sensitive to weekly rate movements, managed to gain 0.1% during the week and were only 7% higher than a year ago. In comparison, the volume of refinancing in mid-December was more than 100% year-on-year.
The mortgage refinancing rate decreased to 67.5% of total applications, from 68.5% the previous week.
Mortgage applications to buy a home rose 2% during the week and were only 1% higher than a year ago. Buyers are facing an expensive and scarce housing market as home builders struggle to meet demand and potential sellers withdraw. As mortgage rates rise, affordability will weaken further, but it looks like more first-time buyers are venturing.
“The housing market enters the busy spring shopping season with strong demand. Purchase requests increased, with an increase in government applications (probably first-time buyers), which went reduce the average loan size for the first time in six weeks, ”Kan said.
Mortgage rates retreated a bit to begin this week as the 10-year Treasury yield fell. Mortgage rates vaguely follow this performance.
“In the last 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, CEO of Mortgage News Daily. “In other words, it was a very bad month for rates, in fact, so bad that it makes more and more sense to look for relief simply because things don’t tend to stay that bad for so long.”