Potential home buyers and real estate agents came to Dunlap, Illinois, for houses for sale.
Daniel Acker | Bloomberg | Getty Images
Higher interest rates have recently suffered some blows to the sailing of the mortgage market.
According to the seasonally adjusted index of the Mortgage Bankers Association, after rising last week, the total number of mortgage applications last week fell 1.1% from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with eligible loan balances of up to $548,250 rose from 3.03% to 3.10%. For loans with a down payment of 20%, the points including the origination fee increased from 0.30 to 0.34.
“Following the FOMC meeting last week, growing optimism about economic strength pushed up U.S. Treasury yields. Mortgage interest rates for all loan types have risen, and the benchmark 30-year fixed interest rate has reached the level since early July 2021. The highest level,” said Joel Kan, MBA’s vice president of economics and industry forecasting.
Housing loan refinancing applications, which are highly sensitive to changes in weekly interest rates, have dropped by 1% from the previous week, which is basically the same as a year ago. The interest rate hike occurred later this week and continued into this week, indicating that the negative impact of next week’s report on refinancing demand will be more serious.
Mortgage applications for home purchases fell by 1% last week, and 12% from a year ago. The weak buying demand is related to rising interest rates, which are still at historically low levels, but more often because of excessively high housing prices.
According to the latest Standard & Poor’s CoreLogic Case-Shiller House Price Index, national house prices in July rose 19.7% year-on-year, higher than the 18.7% annual increase in June. This is another record growth.
“As housing prices continue to rise, the annual growth rate in July exceeds 19%, and large loan applications continue to exceed low-balance loans. The average loan size for home purchase applications reached US$410,000, the highest level since May 2021,” Naoto Kan Say.
It is expected that the price increase will soon begin to cool down slightly, the reason is simple, because the sales volume has fallen and there is more supply in the market. Higher mortgage interest rates will also partially offset the momentum of price increases, as potential buyers will face higher monthly payments.