Mortgage interest rates last week rose at the fastest pace in more than a year, throwing cold water on already cooling demand.
The total volume of mortgage applications was essentially fixed for the week, increasing by only 0.5%, according to the seasonally adjusted index of the Association of Mortgage Banks.
The average fixed-rate interest rate for 30-year fixed-rate mortgages with compliant loan balances ($ 548,250 or less) increased to 3.23% from 3.08%, with points increasing to 0.48 from 0.46 (including the initiation fee) for loans with a 20% down 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 than the previous year.
“Mortgage rates rose last week in the face of market expectations of stronger economic growth and higher inflation,” said Joel Kan, associate vice president of MBA for economic and industrial forecasts. “The 30-year fixed rate has seen the biggest single-week increase in almost a year, reaching its highest [level] from July 2020. “
Home loan refinancing applications, which are most sensitive to weekly rate movements, managed to increase by 0.1% for the week and were only 7% higher than a year ago. By comparison, the volume of refinancing in mid-December was more than 100% higher than last year.
The mortgage refinancing rate fell to 67.5% of total applications from 68.5% in the previous week.
Mortgage applications for the purchase of a house increased by 2% per week and were only 1% higher than a year ago. Home buyers face an expensive and weak real estate market, as home builders struggle to meet demand and potential sellers withdraw. As mortgage rates rise, accessibility will weaken even more, but more first-time buyers seem to be venturing.
“The real estate market is entering the busy spring buying season with strong demand. Purchasing demand has risen, with an increase in government demand – probably first-time buyers – reducing the average size of the loan for the first time in six weeks,” he said. Kan.
Mortgage rates have retreated slightly to begin this week as yields on the 10-year Treasury have fallen. Mortgage rates vaguely follow this yield.
“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, COO of the Mortgage News Daily. “In other words, it was a very bad month for installments – so bad, in fact, that it made more and more sense to look for relief simply because things don’t tend to look so bad. a long time”.