The highest mortgage rate in more than one year has reached its peak, making potential homebuyers concerned about how quickly their window of affordability is closing. Although home prices have been rising, winter has historically been the most difficult season to buy a house, mortgage demand is higher.
The seasonally adjusted index by the Mortgage Bankers Association shows that last week’s purchase loan volume increased by 2.2%. Real estate agents have reported that January is seeing higher than normal demand. Although applications were 17% less than one year ago in the same week, some of this is due to the lower market supply. Although supply usually rises in December, it didn’t last month.
As a result, the 30-year fixed-rate interest rate on mortgages (conforming loan balances) of 3.52% to 3.33% increased. However, points decreased to 0.45 to 0.48 for loans with 20% down payments. It is now the highest rate for a 30-year fixed-rate mortgage since March 2020. The same week last year, it was 64 basis point lower.
Joel Kan, an MBA economist said that mortgage rates rose across all types of loans last week due to the Federal Reserve signalling tighter policy. This pushed U.S. Treasury yields up. The housing market began 2022 with a positive note. The increase in both government and conventional purchase applications was evident with FHA applications rising almost 9% and VA applications growing more than 5%.
FHA loans and VA loans have low down payments and are often preferred by first-time home buyers.
The number of applications to refinance home loans fell by 0.1% in the past week, and was 50% lower than it was one year ago. Now, the refinance volume stands at its lowest in more than one month. Refinances are becoming less attractive as mortgage rates increase.
According to Mortgage News Daily Mortgage rates rose dramatically on Monday, but then settled slightly Tuesday.
“Now, the big question is whether this sudden move towards higher rates is over or not. There is no definitive answer to this question. Matthew Graham (chief operating officer of Mortgage News Daily) wrote that the answer might be a definitive’maybe!’ “Unfortunately this doesn’t mean rates won’t rise, but it does suggest that there may be a slowdown in the rate of change.”