The more mortgage rates creep up, the more demand for refinancing goes down.
Mixed Demand for Mortgages as Rates Rise
The average contract interest rate for 30-year fixed-rate mortgages with confirming loan balances ($546,250 or less) jumped last week to 3.30% from 3.23%. Points decreased to .34 from 0.35 for loans with a 20% down payment to a rate that was -30 basis points lower than last year, according to the Mortgage Bankers Association (MBA).
This mortgage rate of 3.23% is the highest level of mortgage rates in eight months.
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Refinance Demand Slipped -2% w/w
The more mortgage rates climb up, the more demand for refinancing climbs down. This last week refinance demand dropped -2%. Refinance volume came in -26% lower than the same week one year ago. Likewise, the refinance share of mortgage activity slipped to 62.2% of total mortgage applications from 63.3% the previous week.
According to Joel Kan, associated vice president of economic and industry forecasting with the MBA, released a statement, “The increase in rates triggered the fifth straight decrease in refinance activity to the slowest weekly pace since January 2020.”
Purchase Applications Up W/W and Down Y/Y
Mortgage purchase applications rose +4% on a week-to-week basis but were comparatively -9% lower for the same week one year ago. As home prices continued rising, the majority of home sales were in higher price tiers. As a result of these higher-end sales, the average loan size increased to its highest level in three weeks.
Kan said, “Both new and existing home sales last month were at their strongest sales pace since early 2021, but first-time home buyers (the most sensitive to mortgage rate increases) are accounting for a declining share of activity.”
(Existing home sales jumped +7% and new home sales flipped up +40%.)
National Impacts?
The latest CoreLogic S&P Case-Shiller report indicated that home prices continued to be up +19.8%, same as the month before. Could it be that these rising mortgage rates are taking some of the wind off prices?
This Wednesday, industry experts expect the Federal Reserve to begin tapering its COVID-relief efforts by gradually slowing the pace/amount of mortgage-backed bond purchases. If/when such tapering efforts are announced, mortgage rates could rise higher and faster.
Thanks to the Mortgage Bankers Association and CNBC.
