Potential home buyers will see the kitchen when they visit a home for sale in Herlots, Texas.
Matthew Bush | Bloomberg | Getty Images
Mortgage interest rates continued to rise last week, leaving most homeowners with little incentive to refinance. Home buyers who are already struggling with expensive markets have lost more purchasing power due to these higher interest rates.
The average contract rate for 30-year fixed-rate mortgages with eligible loan balances (US$548,250 or less) rose from 3.14% to 3.18%, while the interest rate for loans with a 20% drop in interest rates rose from 0.35 (including origination fees) to 0.37 to pay. This is the highest level since June this year. Interest rates have risen by 15 basis points in the past month.
Therefore, according to the seasonally adjusted index of the Mortgage Bankers Association, the number of mortgage loan applications last week was basically the same as the previous week.
Housing loan refinancing applications fell 1% this week, and 16% from the same week a year ago. The share of refinancing of mortgage activities fell from 64.5% in the previous week to 63.9% of total applications.
“Driven by the decline in FHA refinancing and the 8 basis points increase in the average FHA mortgage interest rate, government refinancing applications fell by more than 3% last week. We continue to expect that as interest rates rise, borrowers see refinancing activities weaken interest rates Incentives,” said Joel Kan, an MBA economist.
Mortgage applications for home purchases increased by 2% this week, but they were down 10% compared to the same week a year ago. Naoto Kan said that this growth was driven by an increase in traditional purchase applications, which kept the average loan size at a high level. This shows that most activities in the real estate market are still at the high end, rather than entry level. The low-end supply is particularly tight, but this is where the demand is highest. As a result, prices saw the biggest increase in the least popular places.
Mortgage interest rates continue to rise this week, indicating that mortgage demand may weaken in the coming months. The real estate market is in its weakest season, and if there is no improvement in affordability, buyers may retreat further.