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A “For Sale” sign outside a home in Albany, California, United States, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.
Joe Riddle | bloomberg | Getty Images
Mortgage rates fell for a second straight week last week, and that was enough to get both current and prospective homeowners on the phone with their lenders.
Mortgage application volumes increased 7.2% last week, compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($726,200 or less) fell to 6.77% from 6.81% in the prior week, with points falling to 0.65 from 0.66 (including origination fees) for loans. With 20% down payment.
Home loan refinance applications were up 6% for the week but were 41% lower than for the same week one year ago. While rates have eased, they are still more than a full percentage point higher than they were a year ago and more than double what they were in the first two years of the Covid pandemic, when there was a refinancing boom. Most borrowers today enjoy lower rates than what is currently available and therefore do not want to lose those rates even for a cash refinance.
Home mortgage applications increased 8% during the week but were 27% lower than in the same week one year earlier.
“Rates that are still over a percentage point higher than a year ago, and low inventory for sale continues to constrain homebuying activity in many markets,” Joel Kahn, MBA economist, said in a news release. “Average Loan Size on a Purchase Loan is down for the third consecutive week, as we continue to see more first-time homebuyer activity in the buy-in market.”
Mortgage rates haven’t moved much this week, but that could change Wednesday afternoon when the Federal Reserve announces the results of its latest policy meeting and updated rate forecasts.
Some say the Fed will use those projections to inform another rate hike or two in 2023. Although the federal funds rate does not directly dictate mortgage rates, such a move would still put a significant amount of upward pressure. On interest rates of all shapes wrote Matthew Graham, COO of Mortgage News Daily.
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