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Mortgage rates rose again last week, throwing even more cold water on demand from both current homeowners and potential homebuyers. Weekly application volume fell 0.1% last week from 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 conforming loan balances ($647,200 or less) increased to 7.14% from 7.06%, with points increasing to 0.77 from 0.73 (including the origination fee) for loans with a 20% down payment.
“Mortgage rates edged higher last week following news that the Federal Reserve will continue raising short-term rates to combat high inflation. The 30-year fixed rate remained above 7 percent for the third consecutive week, with increases for most loan types,” said Joel Kan, MBA’s deputy chief economist.
Refinance demand, which has been positively crushed by the sharp rise in interest rates, fell another 4% for the week and was down 87% compared with the same week one year ago. Mortgage rates started this year around 3%, so there are very few borrowers left who could benefit from a refinance at today’s higher rates. Refinance demand is now at a 22-year low.
Mortgage applications to purchase a home increased 1% for the week. While that wasn’t a major move, it was the first increase in six weeks. Purchase demand, however, is still down 41% from a year ago and close to a seven-year low.
The adjustable-rate mortgage (ARM) share of activity increased to 12% of all applications. ARMs offer lower interest rates, and while they are considered riskier loans, their rates can be fixed for up to 10 years.
Mortgage rates have been moving sideways to start this week, but that could change Thursday, as investors await the October reading from the government’s consumer price index.