Interest rates approached a two-year high last week as refinance applications dropped -13% in just one week.
Seesaw Tilted Up for Interest Rates and Down for Refinance Demand
Last week saw the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $647,200 or less increase from 3.64% to 3.72% with points falling from 0.45 to 0.43.
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This rate of 3.72% is nearing a two-year high. Plus, this rate of 3.72% was 77 basis points lower than the same week one year ago.
As interest rates continued to inch higher, demand for refinancing is, quite simply, not a priority any longer.
Refinance applications plummeted -13% from the week prior. Demand for mortgage refinancing has fallen -53% y/y, according to the Mortgage Bankers Association (MBA).
Joel Kan, an MBA economist, wrote, “After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”
Mortgage Purchase Applications Fell Just Slightly
While mortgage refinance applications appear to be grasping for air, mortgage purchase applications fell just -2% last week. Purchase applications were -11% lower than one year ago.
Potential buyers appear to be extra-motivated to pull the trigger in hopes of getting a jump on rising interest rates plus rising home prices.
One potential buyer in Waldorf MD said that between rising interest rates and rising home prices, “I’m caught between a rock and a hard place.”
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Most Buying Going On at Higher End of Market
With scant supply for homes priced near the national median price point of $375,000, most home buying is happening at the higher end of the housing market.
The average purchase loan size now sits at $433,500, another record high.
Thanks to CNBC.