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A “Doors Open” sign is displayed in the front yard of a house for sale in Columbus, Ohio.
Ty Wright | Bloomberg via Getty Images
Another historically low interest rate on the 30-year fixed mortgage last week has not helped homebuyers come out of their recent crisis.
Falling demand from buyers caused mortgage application volume to drop 0.5% last week from a week earlier, according to the Mortgage Bankers Association’s seasonally adjusted index.
Mortgage applications to buy a home are down 3% for the week and 16% more than a year ago. The annual comparison is now steadily declining.
“The buying market continued its recent decline, with the index falling for the sixth time in seven weeks to its lowest level since May 2020,” said Joel Kan, MBA economist. “Inadequate housing supply puts upward pressure on house prices and impacts affordability – especially for first-time homebuyers and low-income buyers.”
Loan amounts have hit new highs in recent weeks due to soaring home prices and comparatively stronger activity in the upper end of the market. Low rates no longer compensate for these higher prices; in fact, they partially cause them.
The average contract interest rate for 30-year fixed-rate mortgages with compliant loan balances ($ 510,400 or less) fell to a low of 2.98%, from 3.01% to 0 .35 from 0.38 (including set-up costs) for loans with a down payment of 20%. This rate was more than a percentage point higher than a year earlier.
The low rates helped refinance demand, which rose 1% for the week and was 67% higher annually. This is the highest level since August.
However, refinancing demand may already be under pressure, as mortgage rates have risen sharply since news agencies called Joe Biden’s presidential election. The fixed 30-year average is up 12 basis points since Friday, according to Mortgage News Daily, which monitors rates daily.
“This leaves prices on the territory still excellent by historical standards, but the sharp nature of the decision raises questions about our future, “said Matthew Graham, chief operating officer of Mortgage News Daily.” At the moment, traders are cautious about the bond market. This means that the average mortgage rate follower should also be careful. “
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