Higher mortgage rates have hit the refinancing market hard and may have finally hit home buyers.
According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage applications fell 2.2% last week from the previous week.
The average contractual interest rate for 30-year fixed-rate mortgages and associated loan balances ($ 548,250 or less) did indeed drop slightly to 3.33% from 3.36%, with the interest rate dropping to 0. 39 with 0.42 (including registration fees) for loans with a 20% down payment. However, the rate has risen for seven consecutive weeks and is now significantly higher than at the beginning of this year.
As a result, the number of applications for refinancing a home loan for the week decreased by 3% and was 32% less than a year ago. The share of refinancing mortgage activities fell to 60.6% of the total number of applications from 60.9% in the previous week.
“Higher mortgage rates continue to hold back refinancing activities as the pool of borrowers who can benefit from refinancing continues to shrink,” said Joel Kahn, an economist with an MBA.
The number of applications for mortgages for home purchases fell by 2% over the week, but was 39% higher than a year ago. However, this large and seemingly strong annual comparison is due to the fact that the entire housing market was practically stalled when the pandemic broke out a year ago. Then he returned just a few months later. The weekly drop is probably more indicative of what is happening to home buyers right now.
“Many potential homebuyers this spring are feeling the impact of higher rates and rapid growth in home prices,” Kahn said. – Record low stocks lead to a doubling of the rate of growth in house prices compared to last year and even more than 10% growth. growth rates were observed in 2005. The housing market is desperate for additional inventory to keep prices down and remain affordable. “
Mortgage rates have started to rise again this week. Some believe that higher rates will help curb the rise in home prices because potential buyers will simply be pushed back. However, demand does not appear to be declining, and the inventory situation is not improving even with the start of the popular spring season.