Global Courant 2023-05-31 16:33:57
Real estate agents Rosa Arrigo, center, and Elisa Rosen, right, hold an open house in West Hempstead, New York.
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Mortgage rates shot up last week as stronger economic data fueled more fears that the Federal Reserve will not cut interest rates any time soon. In turn, demand for mortgages fell to the lowest level since late February.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) rose from 6.69% to 6.91%, with points rising from 0.83 to 0.66 (including the initial fee) for loans with a discount of 20% payment. That was the weekly average according to the Mortgage Bankers Association, but other daily readings saw the rate jump more than 7%.
As a result, mortgage applications for refinancing a home loan, which are most sensitive to interest rate changes, fell 7% last week from the previous week, adjusted for seasonal effects. The application volume was 45% lower than in the same week a year ago.
The number of applications for a mortgage to buy a house fell by 3% this week and was 31% lower than in the same week a year ago.
“The number of applications for both purchase and refinance loans fell last week as a result of these higher rates,” Michael Fratantoni, MBA’s chief economist, said in a press release. “While demand for refinancing is driven almost entirely by the level of rates, purchase volume remains limited due to the lack of homes on the market.”
With home prices starting to pick up again, mortgage rates rising and inventory levels still well below normal, affordability is hitting potential homebuyers from all sides. The higher the rates are, the less likely current owners will be to list their homes for sale. The vast majority of homeowners today have mortgages with interest rates below 5%.
The direction of mortgage rates largely depends on new news about the economy. The next comes Friday, with the release of the government’s monthly employment report.
Mortgage demand is falling to the lowest level
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