Mortgage rates have shown little movement at the beginning of the week, with the Federal Reserve meeting on Wednesday expected to pass without significant surprises. Despite stable rates, the mortgage market saw a decline in activity. Applications to refinance home loans fell by 7% over the week, though they remain 5% higher than the same week last year. Meanwhile, total mortgage application volume dropped by 2%, according to the Mortgage Bankers Association's seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, defined as $766,550 or less, held steady at 7.02%. However, points for these mortgages increased slightly from 0.62 to 0.63, including the origination fee for loans with a 20% down payment. Interest rates are now 24 basis points higher than they were a year ago.
Applications for mortgages to purchase homes also faced a downturn, declining by 0.4% from the previous week and 7% compared to the same period last year. The majority of homeowners currently hold mortgages with rates significantly below those available today, which may contribute to the reduced demand.
"Even Powell would be hard pressed to shake things up too much considering the mildly positive cue from inflation data and the ongoing policy uncertainty as a counterbalance," – Matthew Graham, chief operating officer at Mortgage News Daily.
While the Federal Reserve's meeting is anticipated to be uneventful, there remains a cautious outlook on potential market reactions.
"That said, one can never truly rule out a volatile reaction to a Powell presser, but the odds are certainly lower this time around." – Matthew Graham, chief operating officer at Mortgage News Daily.
Despite the overall decline in purchase activity, there was a notable increase in applications for FHA purchase loans.
"Purchase activity decreased slightly, but applications for FHA purchase loans were a bright spot, increasing by 2 percent," – Joel Kan, MBA's vice president and deputy chief Economist.