An ‘Open House’ sign is displayed in the front yard of a home for sale in Columbus, Ohio.
Ty Wright | Bloomberg | Getty Images
Mortgage interest rates have increased in four of the first six weeks of 2021, slowing the demand for mortgages.
According to the seasonally adjusted index of the Mortgage Bankers Association, the total number of mortgage applications decreased by 4.1% last week from last week.
The decline came when the average contract rate for 30-year fixed-rate mortgages and conforming loan balances rose to $ 548,250 from 2.92% to 2.96% for loans with a 20% down payment. The rate was 76 basis points higher a year ago.
Most sensitive to swings in weekly interest rates, refinancing demand fell 4% over the week but was 46% higher than a year ago. This annual comparison was more than 100% at the beginning of this year, but it is shrinking.
“Despite some weekly volatility, treasury rates have been driven higher by expectations of faster economic growth as the rollout of the Covid-19 vaccine continues,” said Joel Kan, MBA associate vice president of Economic and Industry Forecasting.
The refinancing share of the mortgage business fell from 71.4% last week to 70.2% of total applications, the lowest level in three months.
Homebuyers are also pulling back, but less because of rising mortgage rates and more because of low supply and overheated house prices. Mortgage applications to buy a home were down 5% this week, but were still 17% higher year over year.
“Purchasing applications cooled down the first week of February, but home buyers are still very active,” Kan said. “Average purchase loan volumes continued to grow, peaking again at $ 402,200 as the higher end segment of the market continues to do well.” The MBA began its weekly survey nearly 31 years ago.
The more expensive segment is doing so well because there is so much more on offer. The bottom of the market is incredibly narrow, which forces start-ups on the sidelines. According to realtor.com, the total number of homes for sale hit a new low in January, almost 43% lower than a year earlier. Homes are also sold on average 10 days faster.