Mortgage interest rates fell somewhat last week after climbing substantially for many weeks, but not enough to boost mortgage demand.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume declined 2.9% last week compared to the prior week.
For 30-year fixed-rate mortgages with conforming loan amounts of $726,200 or less, the average contract interest rate fell to 7.21% from 7.31%, with points decreasing to 0.69 from 0.73 (including the origination fee) for loans with a 20% down payment.
“Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates,” said Joel Kan, an MBA economist. “Rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market.”
Applications to refinance a home loan — which are most sensitive to weekly interest rate changes — fell 5%, compared with the previous week, and were 30% lower than the same week one year ago. The vast majority of borrowers today have loans with rates below 4%. Even with high rates of home equity, borrowers are more likely to take out a second loan to pull cash out, rather than lose their low rate through a cash-out refinance.
Applications for a mortgage to purchase a home fell 2% for the week and were 28% lower than the same week one year ago.
“Prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates,” Kan added.
Mortgage rates turned higher again to start this week, and more economic data out in the coming days could impact rates further. While they have moved in a narrow range the past few weeks, 7% appears to be the new normal. This has thrown cold water on home prices, which had been rising for much of the year but which appear to be easing now yet again.
More | ZiMetro News
