Despite flattening last week, mortgage demand was still significantly lower than it was a year ago.
For loans requiring a 20% down payment, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) rose to 7.14% from 7.06%.
Mortgage rates increased once more last week, further dampening demand from both current homeowners and prospective homebuyers. The seasonally adjusted index from the Mortgage Bankers Association shows that weekly application volume decreased by 0.1% from the prior week last week.
For loans requiring a 20% down payment and conforming loan balances ($647,200 or less), the average contract interest rate increased to 7.14% from 7.06%, while the number of points increased to 0.77 from 0.73 (including the origination fee).
Following the announcement that the Federal Reserve will keep raising short-term rates to combat high inflation, mortgage rates increased slightly last week. For the third week in a row, the 30-year fixed rate was above 7 percent, with increases for most loan types, according to Joel Kan, MBA’s deputy chief economist.
The sharp rise in interest rates has effectively stifled refinance demand, which decreased by 4% for the week and was down 87% from the same week last year. There are very few borrowers left who would benefit from a refinance at today’s higher rates since mortgage rates started this year at around 3%. Demand for refinances has dropped to a 22-year low.
For the week, mortgage applications to buy a home rose by 1%. Even though it wasn’t a significant change, it was the first one in six weeks. However, purchase demand has decreased by 41% from a year ago and is now almost at a seven-year low.
The percentage of activity for adjustable-rate mortgages (ARM) increased to 12% of all applications. Even though they are riskier loans, ARMs offer lower interest rates that can be fixed for up to ten years.
As investors await the government’s consumer price index reading for October, mortgage rates may begin to move in a different direction on Thursday.