Mortgage demand to jump nearly 10% at start of year even as interest rates rise again

“For Sale” outside a home in Hercules, California, U.S., Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.

David Paul Morris | Bloomberg | Getty Images

Mortgage rates moved slightly higher last week for the second week in a row, but are still in a range that consumers seem comfortable with.

Total mortgage applications rose 9.9% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made on the New Year’s holiday.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.81% from 6.76%, with points unchanged at 0.61 (including origination fee) for loans with 20% down payment. The rate peaked around 8% in October and hovered in the 7% range for most of last year.

Home loan refinance applications jumped 19% from the previous week and were up 30% from the same week a year ago. The 30-year fixed rate was 39 basis points higher than a year ago, but 26 basis points lower than four weeks ago. While there aren’t many borrowers who can benefit from refinancing given how low rates were just two years ago, those who can are rushing back into the market.

Home mortgage applications rose 6% for the week, but were still down 16% from the same week a year ago. Buyers continue to struggle with tight supply and overheated home prices.

“The increase in both conventional and government loan purchase and refinancing applications is promising to start the year, but was likely due to some lag in activity after the holiday season and year-end rate declines,” said Joel Kan, an MBA economist. , in issue. “Mortgage rates and applications have been volatile in recent weeks and overall activity remains low.”

But real estate agents say they’re starting to see a new surge in demand from buyers sidelined by the higher-rate environment. More consumers also said they expect mortgage rates to fall further, according to a recent Fannie Mae report.

Mortgage rates have risen slightly again since the start of this week, but remain in the 6% range. The next big economic indicator comes on Thursday with the release of the monthly consumer price index. If it is higher than expected, signaling that more needs to be done to curb inflation, mortgage rates could rise further.

Don’t miss these stories from CNBC PRO:

Leave a Comment