After falling for five straight weeks, mortgage rates jumped last week, triggering a decline in mortgage demand.
Total mortgage application volume fell 7.7% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.39% from 6.18%, with points rising to 0.70 from 0.64 (including the origination fee) for loans with a 20% down payment. The rate was 4.05% one year ago.
“Mortgage rates increased across the board last week, pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time,” said Joel Kan, MBA’s vice president and deputy chief economist.
Applications to refinance a home loan dropped 13% for the week and were 76% lower than the same week one year ago. At the current rate, 100,000 fewer borrowers can benefit from a refinance compared with just one week ago, according to data from Black Knight. A year ago, with mortgage rates at 4.05%, there were just under 4 million refinance candidates.
Mortgage applications to purchase a home fell 6% for the week and were 43% lower than the same week a year ago. Real estate agents across the country are reporting a jump in buyer demand in the past few weeks, perhaps indicating an early start to the historically busy spring market.
“I actually thought, my God, this is amazing. Look at how fast it turned on a dime,” said Dana Rice, a real estate agent with Compass, who was running a busy open house in Bethesda, Maryland, on Saturday. “We went from no showings and nobody coming to open houses, that every single thing that I’ve launched in the last couple of weeks has had multiple offers.”
There is, however, an abnormally high level of all-cash buyers in the market. Peter Fang is one of them. He was at the open house.
“I’m very surprised to see so many cash offers in the market. I thought I would be at a much better position but the competition is still there,” Fang said.
Mortgage rates continued to move up this week after a government report on inflation showed it was higher than expected in January.