An “Open House” sign is displayed in the courtyard of a home for sale in Columbus, Ohio.
Tai Wright | Bloomberg via Getty Images
Higher mortgage rates and the winter weather disaster combined weakened demand for mortgages last week.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage applications fell 11.4% from the previous week.
The average contractual interest rate for 30-year fixed rate mortgages with a corresponding loan balance ($ 548,250 or less) increased to 3.08% from 2.98%, up a point to 0.46 from 0.43 (including processing fees) for loans with a reduction of 20%. payment. This figure was 65 basis points higher than a year ago.
“Mortgage rates have increased in six of the past eight weeks, with the benchmark 30-year fixed rate last week rising above 3% to its highest level since September 2020,” said Joel Kahn, an MBA economist. “As a result of these higher rates, overall refinancing activity fell to its lowest level since December 2020.”
Home loan refinancing applications fell 11% over the week, but were 50% higher than last year. This year-to-year comparison shrinks as rates rise. The share of refinancing mortgage activities fell to 68.5% of the total number of applications from 69.3% in the previous week.
The number of applications for mortgages for home purchases fell by 12% over the week, but was 7% higher than a year ago. Again, the annual comparison for these apps is also shrinking.
Higher mortgage rates are certainly a factor, but the harsh winter weather in the south last week, and especially the power outages in Texas, definitely played a role. Kahn said purchase and refinancing applications dropped more than 40% in the state last week.
Those in the market continue to outbid each other. Housing prices are now growing at the fastest pace in seven years. Average loan size on purchase orders increased to a record $ 418,000 in line with accelerating growth in house prices. Prices are rising so fast due to high demand and record low supply.
Mortgage rates have continued to rise this week, which could further reduce refinancing demand. While rates remain low, coupled with rapidly rising prices, this is not the best combination for the all-important spring market.