Current borrowers and potential buyers are apparently watching every interest rate move, and reacting accordingly.
Higher in rates over the last two weeks sent total mortgage applications into a slide, falling 10.1% last week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was still 46% higher than a year ago, when interest rates were even higher and refinancing was incredibly slow.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.02% from 4.01% last week, with points increasing to 0.38 from 0.37 (including the origination fee) for loans with a 20% down payment. That rate is still 95 basis points lower than a year ago, but interest rates have now jumped 20 basis points in just two weeks.
As a result, applications to refinance a home loan, which are highly rate-sensitive, fell 15% for the week, although they are still 104% higher than a year ago.
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“U.S. Treasury yields trended downward over the course of last week, as the Federal Reserve meeting highlighted the elevated uncertainty in the economic outlook. However, despite falling yields, mortgage rates ticked up again and have risen 20 basis points over the past two weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The increase in rates led to fewer refinances, and activity has now dropped 17% over the last two weeks.”
Mortgage applications to purchase a home fell 3% for the week but were a solid 9% higher than a year ago. Buyer demand has been stronger than expected as fall begins, especially because interest rates are much lower than they were last spring. High home prices and a tight supply of homes for sale, especially at the entry level, are the primary headwinds to a very strong fall market.
“The recent data on increased existing-home sales and new residential construction points to the underlying strength in the purchase market this fall,” Kan said.
Source: cnbc.com | Original Link