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Mortgage interest rates last week moved to the highest level since early May, and that pushed mortgage demand lower for the second straight week.
Total mortgage application volume fell 5.2% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made to account for the Memorial Day holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.07% from 7.05%, with points increasing to 0.65 from 0.63 (including the origination fee) for loans with a 20% down payment.
“Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07 percent – its highest level since early May – despite incoming data indicating somewhat slower economic growth,” said Mike Fratantoni, MBA’s SVP and chief economist.
Applications to refinance a home loan fell 7% from the previous week and were 5% higher than the same week one year ago. Mortgage rates are still about a quarter of a percentage point higher than they were at this time last year, but some borrowers may be refinancing to pull out home equity.
Mortgage applications to purchase a home fell 4% for the week and were 16% lower than the same week a year ago. Buyers are not only contending with higher interest rates. Home prices are still rising and competition, especially on the lower end, is fierce.
“Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” Fratantoni noted.
Mortgage rates ended last week with a sharp drop on Friday and then continued to slide this week. An employment report Tuesday showed job openings were lower than expected in April.
“Lower job openings connote lower rates, all other things being equal,” wrote Matthew Graham of Mortgage News Daily, noting that the government’s monthly employment report, set to be released Friday, will have much more influence on future interest rates.
“This could speak to a bit of anticipation for the rest of the week’s data to be similarly downbeat. The risk here is that the data manages to surprise to the upside and cause a volatile bounce back toward higher rates,” Graham added.