Mortgage rates moved higher again last week, causing homeowners and potential homebuyers to pull back on borrowing.
Overall mortgage application volume decreased 5.1% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.36% from 3.33%, with points increasing to 0.43 from 0.39 (including the origination fee) for loans with a 20% down payment.
As a result, applications to refinance a home loan, which are most sensitive to weekly rate moves, fell 5% for the week and were 20% lower than a year ago. That is the slowest pace since last June.
“Refinance applications declined for the fifth straight week, but there was a gain in VA loan activity,” said Joel Kan, an MBA economist. “Overall, refinance demand has decreased, with volume over the past 10 weeks down by more than 30%.”
Mortgage applications to purchase a home fell 5% for the week and were 51% higher than a year ago. That annual comparison will be very large for the next few months, as the housing market stalled almost completely last year at this time, when the pandemic shut down the economy. It rebounded dramatically at the start of the summer.
“The rapidly recovering economy and improving job market is generating sizable home buying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory,” said Kan.
Mortgage rates have moved lower this week after refusing to break through recent highs. This could bode well for homebuyers in the coming weeks.
“The evidence for a supportive shift in the rate environment is beginning to mount,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “The shift could be underwhelming or short-lived, true, but almost anything is better than the first quarter of 2021. Simply drifting sideways at current levels would be a big victory.”