- Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased from 7.27% to 7.31%.
- The number of applications to refinance a home loan increased by 13% last week compared to the previous week.
- Mortgage applications to purchase a home rose 2% this week and were 26% lower than the same week a year ago.
A for sale sign outside a home in Arlington, Virginia, on August 22, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images
Last week, mortgage rates rose again and so did the demand for refinances, which at first glance makes little sense.
Applications to refinance a home loan increased 13% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Application volume was still 29% lower than the same week a year ago.
Refinance demand typically moves in the same direction as mortgage rates, but that wasn’t the case. Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased from 7.27% to 7.31%, with points remaining unchanged at 0.72 (including the origination fee) for 20% loans . Down payment.
Borrowers may fear that interest rates could rise even further and are therefore jumping in now. It may also be that the number of refinances is currently so low that any small change results in a large percentage change.
Mortgage applications to purchase a home rose 2% this week and were 26% lower than the same week a year ago.
“Purchase applications for conventional and FHA loans increased throughout the week,” said Joel Kan, an MBA economist, in a press release. “Homebuyers continue to face higher rates and limited inventory for sale, which has made purchasing conditions more difficult.”
With home prices now rising again, the average loan size on a purchase application was $416,800, the highest level in six weeks. Demand may be coming back as more homes have come onto the market recently. However, the overall supply is still quite low, which is once again leading to bidding wars.
Mortgage rates were little changed this week as investors await the results of Wednesday’s Federal Reserve meeting and Chairman Jerome Powell’s comments on the future of interest rates.