Last week, mortgage rates remained relatively stable, mirroring the trend of the previous week where mortgage demand also saw no significant change. The high costs and limited supply in the housing market have left potential buyers hesitant, while existing homeowners see little reason to refinance their homes at the current high rates.
Despite minor fluctuations, the total mortgage application volume experienced a marginal decrease of 0.6% compared to the previous week, as reported by the Mortgage Bankers Association’s data. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances slightly dropped to 6.91%, with corresponding points decreasing slightly as well.
The current mortgage rates hovering around 7% have deterred homeowners from seeking refinancing opportunities. With a majority of existing borrowers already locked into lower rates, the incentive to refinance becomes minimal. Refinance applications fell by 2% last week and were 5% lower compared to the same period last year.
Prospective homebuyers faced similar challenges, with applications for new home loans decreasing by 0.1% from the previous week and a significant 13% drop from the same period last year. The decrease in purchasing demand is evident by the fact that the volume now stands at half of what it was in March 2020, before the Federal Reserve’s rate adjustments.
As noted by Joel Kan, an economist at the MBA, the impact of elevated mortgage rates has had a noticeable effect on homebuying activity. While overall purchase applications remained unchanged, there was a slight uptick in FHA purchases during the week. The stagnant demand can be attributed to the affordability challenges posed by the current interest rates.
Looking ahead, the recent increase in mortgage rates can be linked to new economic data indicating higher manufacturing activity and rising prices. The heightened levels of inflation play a crucial role in determining the trajectory of mortgage rates, as highlighted by Matthew Graham from Mortgage News Daily.
The evolving landscape of mortgage rates and market demand underscores the delicate balance between affordability and economic indicators. As the housing market continues to navigate through fluctuations, both buyers and sellers will need to adapt to the changing dynamics of the mortgage industry.