A ‘for sale’ sign sits in a vacant lot near new homes in Dunlap, Illinois.
Daniel Acker | Bloomberg | Getty Images
After a brief respite in the first half of December, mortgage interest rates jumped again to end the year, weighing on demand for mortgage loans.
Mortgage application volume was down 13.2% at the end of last week from two weeks earlier, according to the Mortgage Bankers Association’s seasonally adjusted index. The MBA was closed last week due to holidays.
The average contractual interest rate for 30-year fixed-rate mortgages with conforming balances ($647,200 or less), for loans with a 20% down payment, rose from 6.34% two weeks ago to 6.58%. At the end of 2021, the rate was 3.33%.
Refinancing demand, which is most sensitive to weekly changes in interest rates, fell 16.3% from two weeks earlier and 87% from the same period in 2021.
“Mortgage rates are below October 2022 highs, but should come down significantly to generate additional refinancing activity,” noted MBA economist Joel Kan.
Mortgage applications for buying a home fell 12.2% from two weeks earlier and were down 42% year-on-year. They ended the year at the lowest level since 1996.
Read more: The rise in real estate prices weakened sharply in November
“Purchase inquiries have been impacted by slowing home sales in both new and existing segments of the market. Even as home price growth is slowing in many parts of the country, high mortgage rates continue to put a strain on is hurting affordability and keeping potential buyers out of the market,” said Kan, who also pointed to the threat of a broader economic downturn.
Mortgage rates started this week, and this year, slightly lower, but all eyes are now on the all-important monthly jobs report due out on Friday. Rates will likely move more dramatically on the data, but it’s unclear in which direction they will move.