Let’s unpack what happened with mortgage rates last week. According to the Mortgage Bankers Association (MBA), last week saw a 1.2% decrease in total mortgage application volume. Those pending home sales indicate a stark reversal in homebuyer movement according to the most recent figures. Applications to buy a home were down 3% this week. Despite the drop, purchase applications remain 17% up from where they were this same week last year. This speaks to how much more resilient the market has been this year compared to past years.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dipped from 6.69% to 6.64%. After the new rates were set, the change resulted in a modest decrease in points for these mortgages. They went from 0.60 to 0.59. This latest piece of information is benign unless you’re a homebuyer intending to make a 20% downpayment. It provides particularly important perspective on the true costs of borrowing.
One year ago at this time, mortgage rates were 21 basis points lower. This change hammers home the increasing financial stresses that would-be purchasers are experiencing in 2022. Personal tastes aside, mortgage applications have tanked this week. With this dramatic drop comes an increase in rates, albeit slight, due to a recent sell-off in the European bond market. This volatility can impact potential homebuyers as they weigh their choices.
Though we’ve seen applications for purchases fall off, there was a slight boost in activity for refinancing—up 1% for the week. This was 20 percent higher than the same week one year ago. This surge was almost completely driven by applications from the Federal Housing Administration (FHA) and Veterans Affairs (VA). Yet conventional refinances saw a drop during this time.
Borrower behavior trends indicate that recent, lower homebuying activity has contributed to a decline in applications for all loan types. Today’s housing market is a testament to the demand for a new approach among homebuyers, who are adjusting to a new and dynamic economic environment.