Weekly mortgage demand falls as interest rates rise

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A slight hike in mortgage interest rates was enough to stop refinancing and reduce overall demand.

According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage applications fell 4.2% 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) increased to 3.18% from 3.15%, while the interest rate decreased to 0.35 from 0 .36 (including processing fees) for loans with a reduction of 20%. payment.

Although the rate hike was modest, demand for refinancing fell 7% over the week and was 9% lower than a year ago. So many borrowers have already refinanced at rates below 3% that there is not much room left.

The share of refinancing mortgage activities fell to 61.4% of the total number of applications from 63.3% a week earlier.

The number of applications for mortgages for the purchase of a home increased by 2% over the week, but was 4% less than a year ago.

“While purchasing activity was about 4% lower than a year ago, this can be compared to the sharp spike in activity last spring when the pandemic-related restrictions were lifted,” said Joel Kahn, an MBA economist. “Demand is strong across the country, but homebuyers are still constrained by the lack of homes for sale and rapidly rising house prices.”

Prices for new and existing homes are growing at the fastest pace in nearly two decades, and this has shifted much of the demand to the higher segment of the market. Mortgage loan sizes are on the rise, setting new records, and luxury construction companies such as Toll Brothers are reporting continued strong sales.

“We are encouraged by the continued strength of the housing market, which is supported by a long-term imbalance in supply and demand, a favorable demographic situation, especially the desire for real estate ownership among millennials, low mortgage rates and higher overall home valuation. This was due to the pandemic.” Toll Brothers CEO Douglas Yerley said in the company’s quarterly income statement released Tuesday.

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