Following a brief respite in December and January, mortgage rates are once again on the rise, impacting mortgage demand.
The Mortgage Bankers Association’s seasonally adjusted index reported a 2.3% decline in total mortgage application volume last week compared to the previous week.
For 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less), the average contract interest rate climbed to 6.87% last week from 6.80% the week prior.
Points increased to 0.65 from 0.59 (inclusive of the origination fee) for loans with a 20% down payment. This marks the highest rate since early December 2023.
Applications to refinance a home loan, which are most sensitive to weekly rate changes, experienced a 2% decline for the week but showed a 12% increase compared to the same week one year ago.
Despite rates being approximately half a percentage point higher than a year ago, the recent decrease in rates from last fall’s 20-year peak has prompted more borrowers to seek any available savings.
Nevertheless, the majority of current borrowers have loans with rates significantly lower than those presently offered.
Applications for a mortgage to purchase a home decreased by 3% for the week and were 12% lower compared to the same week last year.
Joel Kan, an economist at the MBA, noted, “Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory.”
A recent report from Redfin revealed an 8% decline in pending home sales over the past four weeks in comparison to the corresponding period from a year ago. These figures gauge signed contracts on existing homes.
Chen Zhao, Redfin’s economic research lead, commented, “We’re seeing a bit of recovery with house hunters touring homes, but even demand at the earliest stages isn’t up as much as we would expect at this time of year.”
“That’s because mortgage rates are climbing again and winter weather has been harsher than usual in much of the country, keeping some house hunters at home” he added.
