The past week has seen minimal movement in mortgage rates, mirroring the stagnant state of mortgage demand for the second consecutive week. The reasons behind this lack of activity can be attributed to the excessive costs associated with mortgages and the limited supply available in the market. Potential homebuyers find themselves constrained by these factors, while existing homeowners see little reason to refinance their mortgages given the current high rates. These challenges have resulted in virtually no change in total mortgage application volume, with a 0.6% decrease reported from the previous week.
One notable trend is the decline in applications for refinancing home loans, which decreased by 2% compared to the previous week and were 5% lower than the same period a year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances also experienced a slight dip, falling from 6.93% to 6.91%. Despite this decrease, the points associated with these loans only saw a minor decrease from 0.60 to 0.59, including the origination fee, for loans with a 20% down payment.
The impact of these stagnant rates and demand is evident in the mortgage application data for home purchases. While applications for purchasing a home only fell by 0.1% from the previous week, they were significantly lower, at 13%, when compared to the same period last year. This decline in purchase demand is starkly contrasted with the surge in homebuying activity seen in March 2020, when the Federal Reserve drastically reduced rates to zero, igniting a frenzy in the housing market. However, with rates now hovering around 7%, sellers are finding themselves stuck with limited options, while buyers are facing affordability challenges.
Notable figures in the mortgage industry, such as Joel Kan, an economist at the Mortgage Bankers Association, have highlighted the impact of elevated mortgage rates on homebuying activity. Kan noted that while there was a slight increase in FHA purchases, overall purchase applications remained unchanged. The recent bounce in mortgage rates at the beginning of the week can be attributed to new economic data reflecting higher manufacturing output and price levels. With inflation playing a significant role in keeping rates elevated, experts like Matthew Graham, the chief operating officer at Mortgage News Daily, suggest that both inflation and pricing dynamics could influence the future momentum of mortgage rates in either direction.