Demand for mortgages fell last week, even after interest rate cuts again
A “For Sale” sign in front of a home in Albany, Calif., on Tuesday, May 31, 2022.
David Paul Morris | Bloomberg | Getty Images
After a stronger start to the year, demand for mortgages plunged last week, despite a further drop in interest rates.
Total mortgage application volume fell 9% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
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The average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 6.20% to 6.19%, with points rising from 0.69 at 0.65 (including origination fees) for loans with a 20% decline. Payment. The rate was 3.78% the same week a year ago.
Even with rates well below their recent highs, home loan refinance applications fell 7% for the week and were 80% lower than the same week a year ago. Homeowners may have briefly retreated after the holiday lull, leading to increased demand for much of January, but overall there are still very few borrowers who can benefit from a refinance at today’s rates, so demand is down again.
Mortgage applications to buy a home fell 10% for the week and 41% year-over-year. Although house prices and mortgage rates have been steadily falling, the supply of homes for sale is still quite low, which could keep demand for mortgages under pressure.
“Buying activity should pick up with the start of the spring home buying season, supported by lower rates and moderate growth in home prices,” said MBA economist Joel Kan. “Both trends will help some shoppers regain their buying power.”
Mortgage rates have been in a narrow range for the past few days, but that could all change depending on comments expected from the Federal Reserve Chairman on Wednesday. The central bank is expected to raise its interest rate, but that does not necessarily raise mortgage rates. Friday’s monthly jobs report could also move rates decisively, depending on what it says about the state of the economy, recession and inflation.
“There are also several important economic reports that could cause traders to reconsider their assessment of the Fed’s likely course of action,” noted Matthew Graham, chief operating officer at Mortgage News Daily. “In other words, even after the Fed-induced volatility, traders might find new reasons to buy/sell bonds at an even faster pace, causing rates to move further for better or for worse. the worst.”
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