It was a mixed bag for mortgage demand last week, as higher
rates did nothing for refinances and homebuyers faced more steep competition
for a pitiful few homes for sale.
Total mortgage application volume fell 0.9% last week from
the previous week, according to the Mortgage Bankers Association’s seasonally
The average contract interest rate for 30-year fixed-rate
mortgages with conforming loan balances ($548,250 or less) moved very slightly
higher to 3.18% from 3.17%. Points increased to 0.34 from 0.30 (including the
origination fee) for loans with a 20% down payment.
With no particular incentive to make a move, demand for
mortgage refinances was essentially flat, rising 0.1% from the previous week.
Application volume was 17% lower than the same week one year ago, even though
rates were higher a year ago. That may be because so many borrowers have
already refinanced at the record low rates seen last fall. The refinance share
of mortgage activity increased to 61% of total applications from 60.6% the
Mortgage applications to purchase a home, which are less
sensitive to weekly rate moves, fell 3% for the week. They were 24% higher than
the same week one year ago, but that annual comparison is skewed. The housing
market stalled in April and May of last year, when the pandemic started, and
then rebounded dramatically in the summer.
“Both conventional and government purchase applications
declined, but average loan sizes increased for each loan type,” noted Joel Kan,
an MBA economist. “This is a sign that the competitive purchase market, driven
by low housing inventory and high demand, is pushing prices higher and weighing
down on activity.”
Higher prices and differing supply are also affecting the
mix of activity, with much more growth in purchase loans with
larger-than-average balances. Home sales on the high end of the market are
soaring because there is far more available for sale. The housing shortage is
most acute on the low end, where demand is strongest.
So far this week, mortgage rates have not moved much, but
that is likely to change with new economic data coming out. Employment reports
on Thursday and Friday could move interest rates in either direction.
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