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After a brief pullback during much of May, mortgage rates began rising again last week. That had an immediate impact on what had been several weeks of strengthening mortgage demand.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.05% from 7.01%, with points rising to 0.63 from 0.60 (including the origination fee) for loans with a 20% down payment.
That was the first increase in four weeks, and while it might not seem like a huge move, that is an average, and rates had fallen back into the high 6% range before shooting higher in the second half of the week.
As a result, total mortgage application volume fell 5.7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
“Both purchase and refinance applications fell, pushing overall activity to the lowest level since early March,” wrote Joel Kan, an MBA economist in a release. “Borrowers remain sensitive to small increases in rates, impacting the refinance market and keeping purchase applications below last year’s levels.
Refinance demand, which had been in a small recovery phase, plunged 14% for the week but was still 12% higher than the same week one year ago.
Applications for a mortgage to purchase a home fell 1% for the week and were 10% lower than the same week one year ago.
“There continues to be limited levels of existing homes for sale and many buyers are struggling to find listings in their price range that meet their needs,” Kan added.
Mortgage rates jumped sharply to start this week, rising 12 basis points just on Tuesday, according to a separate survey from Mortgage News Daily. This followed comments on the direction of interest rates from Minneapolis Federal Reserve President Neel Kashkari. He told CNBC on Tuesday that he needs to see, “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”