An “Open House” sign is displayed as potential home buyers arrive at a property for sale in Columbus, Ohio.
Ty Wright | Bloomberg | Getty Images
Low mortgage rates may now be a thing of the past.
Now, a few weeks of rising rates are affecting what has been an incredibly high demand for refinancing. This reduced the total volume of weekly mortgage applications by 1.9% last week, according to the seasonally adjusted index of the Association of Mortgage Banks.
The average interest rate on 30-year fixed-rate mortgages with compliant loan balances ($ 510,400 or less) rose to 2.92% from 2.88%, with points rising to 0.37 from 0.33 (including the initiation fee) for loans with a 20% down payment. The rate was 95 basis points higher a year ago.
The average fixed 15-year rate rose for the first time in seven weeks to 2.48%.
With higher rates now offering lower potential savings, home loan refinancing applications have fallen by 5% for the week, but were 87% higher than a year ago. This annual comparison was over 100% just last week.
“Market expectations for a larger-than-anticipated fiscal aid package, which is expected to continue to drive growth and lower unemployment, have led to higher Treasury yields in the past two weeks,” said Joel Kan, MBA Associate Vice President for economic and industrial forecasts. “After a wave of post-holiday refinancing, higher rates have fallen on demand for refinancing.”
However, the demand for home buyers has increased despite higher rates. Mortgage applications for the purchase of a house increased by 3% per week and were 15% higher than a year ago. The coronavirus pandemic has caused strong demand for larger, suburban homes. Despite the launch of vaccines, this demand does not seem to be declining. The biggest hurdles for home buyers right now are high prices and a record inventory of homes for sale.
“Home buyers in early 2021 continue to look for newer and larger homes,” Kan said. “The average loan size for purchase loans has risen to $ 384,000, the second highest level in the survey,” which dates back to 1990.
The approaching Biden administration is preparing to make more moves in the real estate market that could benefit both home buyers and builders. However, mortgage rates have started the fixed week as traders are likely to wait for the first major economic policy announcements before making a move.