A “For Sale” sign outside a home in Atlanta, Georgia, on Friday, February 17, 2023.
Dustin Rooms | Bloomberg | Getty Images
After falling to a 28-year low last week, demand for mortgages recovered slightly, even as interest rates rose.
Total mortgage applications rose 7.4% last week, according to the Mortgage Bankers Association’s seasonally adjusted index.
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This happened even as the average contract rate for 30-year fixed rate mortgages with conforming loan balances ($726,200 or less) rose from 6.71% to 6.79%, with points rising from 0.80 to 0.77 (including the initial fee) for loans with a 20% down payment. That is the highest level since November 2022 and 270 basis points higher than a year ago.
“Even with higher rates, there was an increase in applications last week, but this was compared to two weeks of declines to very low levels, including a holiday week,” noted Joel Kan, an MBA economist.
Applications to refinance a home loan rose 9% week over week, but were 76% lower than the same week a year ago. At last week’s price, there were barely 200,000 borrowers who could save monthly from a refinance, compared to more than 2 million who could have benefited from the price a year ago, according to calculations by Black Knight, a mortgage data and analytics firm.
Mortgage applications to buy a home rose 7% per week and were 42% lower than the same week a year ago. There’s more inventory on the market now compared to a year ago, but new listings are still weak, suggesting that what’s on sale isn’t selling very quickly.
The jump in demand could well be the start of the traditionally busy spring market. However, the share of variable rate mortgage applications rose last week, suggesting more buyers are struggling to afford the current, still expensive housing market. ARMs offer lower interest rates with higher risk.
According to a separate study by Mortgage News Daily, mortgage rates have jumped even higher, over 7%. Federal Reserve Chairman Jerome Powell told lawmakers on Capitol Hill on Tuesday that rate hikes could accelerate again. This deterred investors and led to higher bond yields. Mortgage rates loosely track the yield on the 10-year Treasury.
“While Fed Chairman Powell said nothing noteworthy or different, the markets read enough into his speech to meaningfully shift the course of Fed Funds Rate expectations,” said Matthew Graham, chief operating officer of Mortgage News Daily.