Mortgage refinancing demand declines as interest rates rise

Historically low mortgage rates can now make headlines of the past.

Today, several weeks of rising rates are spraying what was incredibly high demand for refinancing. According to the Mortgage Bankers Association’s seasonally adjusted index, the total weekly volume of mortgage applications fell 1.9% last week.

The average contract interest rate for 30-year fixed rate mortgages with compliant loan balances ($ 510,400 or less) fell from 2.88% to 2.92%, with points falling from 0, 37 to 0.33 (including set-up costs) for loans with a 20% reduction. Payment. The rate was 95 basis points higher a year ago.

The average 15-year plan rate rose for the first time in seven weeks, to 2.48%.

With higher rates now offering less potential savings, mortgage refinancing requests fell 5% for the week but were 87% higher than a year ago. This annual comparison was over 100% last week.

“Market expectations for a larger-than-expected tax relief package, which should further stimulate economic growth and reduce unemployment, have pushed Treasury yields higher over the past two weeks,” said Joel Kan, vice-president. associate president of MBA in economic and industrial forecasting. “After a wave of post-holiday refinancing, higher rates reduced the demand for refinancing.”

Demand from home buyers has increased despite the higher rates, however. Home buying mortgage applications are up 3% for the week and 15% more than a year ago. The coronavirus pandemic has spurred a strong demand for larger suburban homes. Despite the deployment of the vaccine, this demand does not appear to be diminishing. The biggest hurdles for home buyers today are the high prices and record inventory of homes for sale.

“Homebuyers in early 2021 continue to look for newer, larger homes,” Kan said. “The average purchase loan amount has risen to $ 384,000, the second highest level in the survey,” which dates back to 1990.

Biden’s incoming administration is gearing up to make multiple moves in the housing market that could favor both buyers and builders. Mortgage rates, however, started the week flat, as traders likely wait for the first big policy announcements before taking action.