Higher interest rates took some recent wind out of the sails in the mortgage market.
According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of mortgage applications fell by 1.1% after gains in the week before.
From 3.03%, the average 30-year fixed-rate interest rate on mortgages with conforming loan amounts of up to $548,000. was now 3.10%. For loans with 20% down payments, the points rose from 0.30 to 0.34.
After last week’s FOMC meeting, Treasury yields rose due to increased optimism regarding the strength of our economy. Joel Kan, MBA associate vice president for economic and industry forecasting, stated that mortgage rates rose in all types of loans. The benchmark 30-year fixed rate reached its highest point since July 2021.
The rate of home loans refinances, which are sensitive to changes in the weekly rates, fell 1% over the past week, and were virtually flat year-over-year. This week saw an increase in interest rates late last week. It continued through this week. The negative impact on refinance demand is expected to be greater in next week’s report.
Last week’s mortgage applications for home purchases fell by 1% and was 12% less than one year ago. Rising interest rates are not the reason for low purchase demand. It is more due to skyrocketing home prices.
Prices nationally increased 19.7% year over year in July, up from an 18.7% annual increase in June, according to the latest S&P CoreLogic Case-Shiller Home Price Index. Another record-breaking increase.
The home-price increase continues to be hot. It increased more than 19% each year in July. This means that applications for loan amounts larger than lower-balance loans continue to grow. Kan reported that the average loan for a purchase order was $410,000. It is at its highest since May 2021.
Because sales are down and there is more inventory, price gains will soon slow. Moreover, rising prices will be fueled by higher mortgage rates. Potential buyers will face increased monthly payments.
