A sign promoting the purchase or refinancing of home loans with a Bank of America in New York.
Scott Mlyn | CNBC
A brief surge in demand for mortgage refinancing quickly fizzled out after interest rates began to rise again along with the stock market. The initial fear of the Covid-Omicron variant caused interest rates to drop for about four days, causing borrowers to rush to their lenders, but then rates rose sharply again and then fluctuated a little last week.
As a result of the volatility, the average contract rate on 30-year fixed-rate mortgages with corresponding loan balances ($ 548,250 or less) for the week was unchanged at 3.30%, with the points unchanged at 0.39 (including the lending fee). ) for loans with a down payment of 20%.
Home loan refinance requests fell 6% for the week and were 41% lower than the same week a year ago, according to the Mortgage Bankers Association seasonally adjusted index. Last year, interest rates were around 45 basis points lower at this point.
“Fewer homeowners have a strong incentive to refinance at current rates,” said Joel Kan, an MBA economist.
According to Black Knight, a mortgage data and analytics company, about a quarter of all borrowers have interest rates of less than 3% and more between 3% and 3.5%. In general, borrowers would need to cut about 50 basis points from their current interest rate to get a refinancing that is worth the cost.
The number of home purchase mortgage applications increased by just 1% week-to-week and 9% lower than in the same week a year ago. While housing demand is strong, supply is weak and prices continue to rise rapidly. The impending development of higher mortgage rates is of no help to home buyers, especially first-time buyers who have very little additional headroom in their budget.
Mortgage rates were flat earlier this week, but all bets are out on Wednesday afternoon when the US Federal Reserve makes its latest monetary policy announcement. While mortgage rates do not track the Fed’s policy rate, they are heavily influenced by the Fed’s purchases of mortgage-backed bonds. That support since the beginning of the pandemic resulted in mortgage rates hitting more than a dozen record lows in the past year. That’s over.
“The Fed will most likely announce a faster termination of its bond purchase programs. The target end date for the bond purchases will tacitly hint at the timeframe in which the Fed is considering raising rates for the first time since cutting it to zero to mark the start of the pandemic, “wrote Matthew Graham, chief operating officer at Mortgage News Daily.