An ‘Open House’ sign is displayed when prospective home buyers arrive at a property for sale in Columbus, Ohio.
Ty Wright | Bloomberg | Getty Images
Record high mortgage rates may now be a headline of the past.
Now, several weeks of soaring interest rates are submerging the incredibly high demand for refinancing. That brought the total weekly mortgage application volume down 1.9% last week, according to the Seasonally Adjusted Mortgage Bankers Association index.
The average contract rate for 30-year fixed-rate mortgages and conforming loan balances ($ 510,400 or less) increased from 2.88% to 2.92%, increasing points to 0.37 from 0.33 (including the origination fee) for loans with a 20% decrease in payment. The rate was 95 basis points higher a year ago.
The average rate on the 15-year fixed interest rate rose to 2.48% for the first time in seven weeks.
With higher rates yielding fewer potential savings, requests to refinance a home loan fell by 5% for the week, but were 87% higher than a year ago. That annual comparison was already more than 100% last week.
“Market expectations of a larger than expected fiscal package, expected to further boost economic growth and lower unemployment, has pushed Treasury yields up over the past two weeks,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting from MBA. “After a wave of post-holiday refinances, the higher rates moved away from refinancing demand.”
However, homebuyer demand increased despite higher rates. Mortgage applications to buy a home were up 3% this week and 15% higher than a year ago. The coronavirus pandemic created strong demand for larger suburban homes. Despite the rollout of vaccines, that demand does not seem to be declining. The biggest hurdles for home buyers right now are high prices and a record high stock of homes for sale.
“Homebuyers will continue to look for newer, larger homes in early 2021,” 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 new Biden administration is gearing up to take multiple steps in the housing market that could benefit home buyers and builders alike. Mortgage rates started the week flat, however, as traders are likely to wait for the first major economic policy announcements before moving forward.