Both refinancing and purchase applications dropped last week as rising interest rates turned away current and potential homeowners.
Refinance Applications Plunged -14% w/w
Climbing mortgage interest rates are definitely impacting current homeowners who may be considering refinancing their mortgages. Last week, interest rates climbed from 4.27% to 4.5% and, unsurprisingly, mortgage refinance applications dropped -14% w/w, according to the Mortgage Bankers Association (MBA).
Annually, refinance applications cratered a whopping -54%, according to the MBA.
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The cost benefits of refinancing are clearly decreasing as interest rates continue to rise. Next week we’ll have the data to show just how much those refinancing cost benefits are decreasing when we see homeowners’ reactions to rates hitting 4.79% this week.
Purchase Application Also Down, Just Not As Much
The MBA indicated that mortgage purchase applications decreased -2% w/w and -12% y/y.
As we’ve mentioned before, purchase applications are less influenced by mortgage rate increases than refinance applications.
It’ll be interesting to track demand for both refinance and purchase applications in the coming weeks and months if/when interest rates continue climbing upward.
Economists Revising Home Sales Estimates Downward
Economists and real estate analytics firms began revising their estimates downward on home sales for 2022 when the Federal Reserve announced its intentions to authorize six additional rate hikes this year when it announced its first +0.25% rate hike on March 16.
Jerome Powell, in a speech on March 19, rattled those economists and analytic firms even more by saying the Fed may double its forthcoming rate hikes to +.50% in efforts to curb inflation.
Remember that the current +0.25% rate hike announced on March 16 applies to conventional 30-year fixed mortgages; interest rates and rate hikes for both FHA and VA loans, the two most favored loans by first-time buyers, are higher.
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