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Mortgage rates rose significantly again for most of the past week, causing a massive drop in mortgage demand, but everything changed on Friday with the news of the Covid-Omicron variant.
Last week, the average interest rate on the 30-year conforming loan balance mortgage ($ 548,250 or less) rose from 3.24% to 3.31%, with the points increasing from 0.36 to 0.43 (including the lending fee) for loans with a deposit of 20%. according to the Mortgage Bankers Association. That is the highest rate since April this year. A year ago the rate was 39 basis points lower.
The interest rate hike meant that home loan refinancing applications fell by 15% per week, seasonally adjusted. An additional adjustment was made for the Thanksgiving holiday. Refinancing demand was 41% lower than the same week a year ago. The refinancing share of mortgage activities fell from 63.1% in the previous week to 59.4% of the total applications.
“Mortgage rates rose for the third straight week, reducing the incentive to refinance for many borrowers. Over the past three weeks, rates have increased 15 basis points and refinancing activity has declined by over 18%,” said Joel Kan, associate vice president of MBA of Economic and Industry Forecasts.
Home purchase mortgage applications rose 5% in the week and were 8% lower than a year ago. Buyers have returned to the market unexpectedly as this is usually the start of the slower home construction season. October home sales, as measured by signed contracts, rose an unusually high 7.5% compared to September, according to the National Association of Realtors. Some economists suggest that fears of higher mortgage rates will push more buyers into the market by spring.
The average purchase loan amount rose to $ 414,700 – the highest since February 2021. This reflects not only higher home prices, but also the fact that most of the buying activity is at the higher end of the market, with more homes for sale.
“As home prices continue to climb in double digits, new, higher-priced home buyers continue to dominate buying activity while first-time buyers remain depressed,” Kan added.
While rates rose for much of the past week, they made a quick reversal on Friday as the news broke about the Omicron variant. According to Mortgage News Daily, the 30-year average rate had fallen 15 basis points by Tuesday.
Interest rates began to fall due to the variant and then continued to fall, according to a statement by Federal Reserve Chairman Jerome Powell before Congress on Tuesday.
“Powell’s comments on inflation and bond purchases have driven the bond market the other way. Mortgage-backed bonds lost all of the day’s improvements and most lenders made their noon adjustments higher.” in rate, “wrote Matthew Graham, chief operating officer at Mortgage News Daily.
