Mortgage rates, experienced another increase last week, and surprisingly, so did the demand for refinancing, a phenomenon that may seem unexpected.
According to the Mortgage Bankers Association‘s seasonally adjusted index, applications for refinancing home loans saw a significant 13% surge last week when compared to the previous week.
However, it’s important to note that the application volume remained 29% lower than the same week in the previous year. Typically, refinancing demand tends to follow the direction of mortgage rates, but in this case, that wasn’t the pattern observed.
The average contract interest rate, last week, for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) actually increased slightly from 7.27% to 7.31%, while the points associated with these loans remained unchanged at 0.72 (including the origination fee) for those with a 20% down payment.
Possibly, borrowers are apprehensive about the possibility of further rate increases, prompting them to act swiftly. Another factor at play might be the relatively low number of refinancing applications currently, causing even minor fluctuations to have a substantial percentage impact.
Home Buying Trends and Mortgage Applications
During the week, applications for mortgages aimed at home purchases saw a 2% uptick, but they remained 26% below the figures from the corresponding week in the previous year.
Joel Kan, an economist at the MBA, noted, “Purchase applications for both conventional and FHA loans experienced growth over the past week. Homebuyers are grappling with elevated interest rates and a limited supply of homes for sale, creating more challenging conditions for purchasing.”
Given the recent resurgence in home prices, the average loan amount on purchase applications has climbed to $416,800, marking the highest point in six weeks. The increase in demand may be due to the increasing number of home appliances in the market. However, it is worth noting that all features are still rare, which has led to new competition.
Housing, prices remained stable this week. Investors held their positions as they eagerly awaited the results of Wednesday’s Federal Reserve meeting and Chairman Powell’s next statement on future interest rates.
Unexpectedly, as mortgage rates rose, the refinancing rate increased by a staggering 13%. People will turn to refinancing due to concerns about rising interest rates. Despite difficulties such as high prices and low inventory, there was a 2% increase in home purchase applications. Investors are waiting for the Fed’s decision.