A For Sale sign displayed in front of a home on February 22, 2023 in Miami, Florida.
Joe Raedle | Getty Images
Mortgage demand has increased for three straight weeks now, as interest rates dropped in response to the recent bank failures.
But rates are rising again, and that could put a damper on application volume.
Total mortgage application volume rose 3% last week compared with 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 ($726,200 or less) decreased to 6.48% from 6.71%, with points decreasing to 0.66 from 0.79 (including the origination fee) for loans with a 20% down payment. It was the lowest level in a month but still much higher than the same week one year ago, when the rate was about 4.5%.
“Treasury yields declined last week, driven by uncertainty over the health of the banking sector and worries about the broader impact on the economy,” said Joel Kan, MBA’s deputy chief economist. “However, mortgage rates have not dropped as much as Treasury rates due to increased MBS market volatility.”
Applications to refinance a home loan increased 5% for the week but were 68% lower than the same week one year ago. Refinance demand is highly sensitive to weekly rate moves, but there are precious few borrowers right now who can still benefit from a refinance at today’s higher interest rates.
Mortgage applications to purchase a home increased 2% from the previous week and were 36% lower than the same week one year ago. Today’s homebuyers may be less influenced by weekly interest rate moves and more influenced by the state of the economy. The stress on the banking sector, high home prices and a tight supply of homes for sale have all been weighing heavily on consumer confidence.
With fears over the banking sector subsiding somewhat, at least in financial markets, mortgage rates moved higher to start this week, according to a separate index from Mortgage News Daily. On Tuesday, it put the average rate at 6.75%.
All ears are on the Federal Reserve, which is expected to raise the federal funds rate by a quarter point, due to the stress on the banking sector. Mortgage rates don’t follow the Fed exactly, but they do respond to its perception of the overall economy.
“Either way, they will also be updating their rate outlook for the coming months/years and that’s arguably even more important than what they do with [the] rate hike,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
Post source: cnbc