Mortgage rates rose again last week, causing homeowners and potential homebuyers to withdraw from borrowing.
According to the seasonally adjusted index of the Mortgage Bankers Association, the total number of mortgage applications is down 5.1% from last week.
Average contract rate for 30-year fixed-rate mortgages and conforming loan balances ($ 548,250 or less) increased from 3.33% to 3.36%, with points increasing from 0.39 to 0.43 (including origination fee) for loans with a 20% payment decrease.
As a result, applications for home loan refinancing, which are most sensitive to weekly interest rate changes, fell 5% for the week and were 20% lower than a year ago. That is the lowest rate since June last year.
“Refinancing applications have been declined for the fifth week in a row, but there has been an increase in VA loan activity,” said Joel Kan, an MBA economist. “In general, demand for refinancing has declined, with volume in excess of 30% over the past 10 weeks.”
Mortgage applications to buy a home were down 5% this week and 51% higher than a year ago. That annual comparison will be very strong in the coming months, as the housing market almost came to a halt at this point last year, when the pandemic brought the economy to a standstill. It recovered dramatically at the beginning of the summer.
“The rapidly recovering economy and improving labor market are generating significant demand for home purchases, but activity in recent weeks has been limited by faster growth in house prices and extremely low inventory,” Kan said.
Mortgage rates have fallen this week after declining to break through recent highs. This could bode well for home buyers in the coming weeks.
“Evidence for a supportive shift in the pricing environment is beginning to build,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “The shift can be disappointing or short lived, that’s true, but almost everything is better than the first quarter of 2021. Just drifting sideways at the current level would be a big win.”