As interest rates resumed their climb, mortgage refinancing failed

Read Time:2 Minute, 18 Second


Advertising sign for interest rates on buying or refinancing home loans at Bank of America in New York.

Scott Mlin | NBC Finance Channel

After interest rates climbed as the stock market resumed, the short surge in mortgage refinancing demand quickly subsided. The initial panic from the Covid omicron variant caused interest rates to drop for about four days, causing borrowers to flock to their lenders, but then interest rates rose sharply again, and then saw a see-saw last week.

Due to large fluctuations, the average contract interest rate for 30-year fixed-rate mortgages with a loan balance that meets the requirements (US$548,250 or less) this week remained unchanged at 3.30%, and the number of points remained at 0.39 (including the origination fee) for the down payment 20 % Of loans.

According to the Mortgage Bankers Association’s seasonally adjusted index, housing loan refinancing applications fell by 6% this week and 41% from the same week a year ago. Interest rates at this time last year fell by about 45 basis points.

MBA economist Joel Kan said: “Few homeowners are refinancing at current interest rates.”

According to mortgage data and analytics firm Black Knight, about a quarter of borrowers have interest rates below 3%, and more are between 3% and 3.5%. Generally speaking, the borrower needs to cut the current interest rate by about 50 basis points to make the refinancing worthwhile.

Mortgage applications for home purchases increased by only 1% per week, which was a decrease of 9% from the same week a year ago. Although demand for housing is strong, supply is weak and prices continue to rise rapidly. The trajectory of higher mortgage rates in the future will not help homebuyers, especially first-time homebuyers who have little extra room in their budget.

Mortgage interest rates have remained stable starting this week, but on Wednesday afternoon the Federal Reserve will issue the latest monetary policy announcement, by which time all bets will end. Although mortgage rates do not follow the federal funds rate, they are largely affected by the Fed’s purchase of mortgage-backed bonds. This support since the beginning of the pandemic has caused mortgage interest rates to hit more than a dozen historical lows last year. That is about to end.

“The Federal Reserve is likely to announce that it will end its bond purchase program sooner. The target end date for bond purchases will default to imply the time frame for the Fed to consider raising interest rates for the first time since reducing interest rates to zero. The beginning of the pandemic,” Mortgage News Daily “COO Matthew Graham wrote.


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