Mortgage demand has come to a standstill after a brief reprieve from increased refinance activity, as the overall housing market is beginning to cool. Recent data reveals that the current landscape for mortgage applications is anything but straightforward. Inflation, interest rates, and other economic factors are still playing a role in determining borrower behavior.
Last week, the average contract interest rate for 30-year fixed rate mortgages fell by 4 basis points. It dropped from 6.39% to 6.34% for conforming loan balances of $806,500 or less. Despite this decline, points for these loans actually increased, from 0.54 to 0.57. This figure does incorporate the current origination fee charged by borrowers making a 20% down payment. This higher upfront cost in points can push many borrowers out of the market entirely.
Here to give us the thrilling details, Mike Fratantoni, Senior Vice President and Chief Economist at the Mortgage Bankers Association. Refinance volume was through the roof last week, skyrocketing 80% from just four weeks ago! “Interest rates generally have moved up following the FOMC meeting last week but remain in a range that should continue to lead to increased refinance activity,” Fratantoni stated.
Refinance applications make up more than 60% of all mortgage application activity right now. This new surge in refinancing was mostly fueled by government apps, with VA refinance volume up almost 15%. In these challenging times, borrowers are understandably on the lookout for strategies to reduce their monthly payments. They’re especially focused on adjustable-rate mortgage (ARM) rates because these are much lower than fixed-rate loans.
Refinance demand jumped 1% this week and rocketed 42% from the same week last year. Demand for mortgages overall came to a standstill once again last week. A significant 58% weekly increase in refinance demand did not sustain momentum, even as interest rates eased slightly at the beginning of the week. According to Mortgage News Daily, rates were mostly flat to start the new week.
Refinance applications have ruled the market, applications to buy a new home saw a slight increase. They increased by 0.3% from the previous week and are 18% greater than this time last year. This is a strong signal that homebuyer activity usually drops with seasonal trends in fall months, there’s still robust interest in purchasing amid high rates.
Fratantoni noted, “While homebuyer demand typically tends to decrease during the fall, purchase application activity remains relatively strong right now.” This indicates at least some degree of urgency, that despite the overall economic unknowns homebuyers are still willing to jump into the market.
Outside of these seasonal trends, demand for adjustable-rate mortgages retreated last week after a brief, but rapid rise. This upward and downward movement is indicative of borrowers switching up their strategy as they respond to shifts in the prevailing interest rate landscape.
“Fed speeches can certainly have an impact, but it depends on the specifics. Still, some traders were relieved that he didn’t use the opportunity to reiterate several of last week’s topics that pushed rates higher.” – Matthew Graham, Chief Operating Officer at Mortgage News Daily.