For the seventh week in a row, demand for mortgages dropped, falling by 10.8% from the previous week as high-interest rates were felt in both refinance and purchase applications. Most of the MBA survey respondents, highlighted the fact that the drop-in market activity has been correlated with the increase in rates of the 30-year fixed mortgage loans.
The average contract interest rate on 30-year fixed-rate mortgages backed by loans of $766,550 or less, improved to 6.81% from last week’s 6.73% which is the highest. Although this rate raise comes together with a slight decrease in points to 0.68 down from 0.69 including the origination fee for a loan with a 20% cash equity.
Joel Kan, an economist from the MBA stated that this was the sixth week in a row that the volume of mortgage applications had dropped — with home purchase demand reaching the lowest level since mid-August. The volume of applications for refinancing purposes also decreased and reached the lowest levels since May. Specifically, however, the number of applications for refinancing fell by 19% compared to the previous week, although it was still 48% higher than the level recorded in the same week last year which had significantly high mortgage rates.
The decline in drop-in refinance activity has been linked to the lowered interest sensitive attitude of homeowners with large loans. The average loan size on refinance applications fell below $300, 000 given that high amount borrowing individuals tend to be more sensitive to rate changes. Similarly, mortgage applications for home purchases also decreased by 5% on week over week basis, although they recorded an annual growth rate of 2% from the previous year. However, with a surge in purchase activity in the past few months, rising mortgage rates are once again pushing some buyers out of the market and fears over the economy and the future elections have forced some to sit on meetings concerning buying houses.
Mortgage rates were unchanged to begin this week, eyes will shift to the Federal Reserve, and its decision before the week runs out, regarding rates, as this is likely to impact on market activities and demand.
