Mortgage rates rose again last week, taking their toll on current borrowers who may be looking for refinance. However, demand from homebuyers appears to be holding up for now.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage applications fell 6.8% last week compared to the previous week. This is because the average contract rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased from 4.50% to 4.80%, with points falling from 0.59 (including the setup fee) to 0.56 for loans with a 20% down payment.
“Mortgage rates rose last week to their highest level in more than three years as investors continue to price in the impact of tighter monetary policy from the Federal Reserve,” said Michael Fratantoni, MBA’s chief economist.
A 15% weekly drop in refinancing requests was the main driver of the decline in overall mortgage demand. They are now a whopping 60% lower than a year ago. The refinancing share of mortgage activity fell to 40.6% of all applications from 44.8% in the previous week.
Mortgage applications to buy a home rose 1% this week but were 10% lower than the same week a year ago. Homebuyers today continue to face sky-high prices and record-low supply alongside rising mortgage rates. Affordability is weakening dramatically, but some real estate agents say the competition isn’t abating.
“I have to say I’ve had more cash buyers this year than ever before and they’re borrowing money from parents. They only find that money because they know it’s more competitive with cash offers,” said Kelly Theriot McMahon, a real estate agent at Compass in Dallas.
At an open house held last Sunday, she said buyers are preparing for a bidding war.
“You have to look at it and know that you’re probably going to have to offer $40,000 over the asking price,” said Lauren Poey, a potential buyer who toured the home.