New homes are for sale on June 28, 2023 at Woodland Village, built by developer Lifestyle Homes in Cold Springs, Nevada.
Andri Tambunan | AFP | Getty Images
Mortgage rates rose last week to their highest level since early December, negatively impacting mortgage demand. According to the Mortgage Bankers Association's seasonally adjusted index, overall application volume fell 10.6% compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased from 6.87% to 7.06%, with points for loans at 20% down increasing from 0.65 to 0.66 ( including the processing fee) increased payment.
“Mortgage rates rose back above 7 percent last week after news that inflation picked up in January, dampening hopes of an imminent rate cut,” MBA chief economist Mike Fratantoni said in a news release.
The number of applications to refinance a home loan fell 11% last week compared to the previous week and was just 0.1% higher than the same week a year ago. A year ago, the 30-year fixed rate was 6.62%. Refinancing volumes have been higher this year than last despite higher interest rates, but last week's rate hike clearly made refinancing not worthwhile for most borrowers.
Mortgage applications to purchase a home fell 10% for the week and were 13% lower than the same week a year ago. They were at their lowest level since the beginning of November 2023.
“Potential homebuyers are very sensitive to these rate changes as affordability is strained due to higher rates and higher home values in this supply-constrained market,” Fratantoni added.
With higher interest rates, adjustable-rate mortgage (ARM) share of activity increased to 7.4% of total applications. ARMs offer lower interest rates but are considered riskier because they can adjust upward after a set period of time.
Mortgage rates rose further on Friday after a monthly government report on wholesale prices showed inflation was still stubborn and higher than most analysts had expected. They didn't move much at the start of this week.