Weekly mortgage demand declines as rates rise

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People are waiting to visit a home for sale in Flower Park, Nassau County, New York.

Wang Ying | Xinhua News Agency | Getty Images

Demand for mortgages was mixed last week as higher rates did not affect refinancing and homebuyers faced stiffer competition for a measly few homes for sale.

According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage applications fell 0.9% last week from the previous week.

The average contractual interest rate for a 30-year fixed rate mortgage loan with a corresponding loan balance ($ 548,250 or less) increased slightly from 3.17% to 3.18%. Points increased to 0.34 from 0.30 (including processing fees) for loans with a 20% down payment.

In the absence of any particular incentives to take further action, the demand for mortgage refinancing remained virtually unchanged, increasing by 0.1% from the previous week. The volume of applications was 17% lower than in the same week a year ago, although the number was higher a year ago. This may be due to the fact that so many borrowers have already refinanced at record low rates last fall. The share of refinancing mortgage activities increased to 61% of the total number of applications from 60.6% in the previous week.

Home mortgage applications, which are less sensitive to weekly rate changes, fell 3% over the week. They were 24% higher than the same week a year ago, but this year-to-year comparison is skewed. The housing market stalled in April and May last year when the pandemic began and then rebounded sharply in the summer.

“The number of applications for regular and government procurement declined, but the average loan size increased for each type of loan,” said Joel Kahn, an economist with an MBA. “This is a sign that a competitive procurement market, driven by low housing stock and high demand, is pushing prices up and reducing activity.”

Higher prices and different supply also affect the structure of activities, with much higher growth in purchase loans with above average balances. Home sales in the upper end of the market are skyrocketing because there are so many more available for sale. The housing shortage is most acutely felt in the lower price segment, where the demand is highest.

So far this week, mortgage rates have not changed much, but that is likely to change with the release of new economic data. Employment reports on Thursday and Friday can change interest rates in either direction.

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