Mortgage rates hit their highest in 9 months, demand for loans drops further
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The economic damage caused by the omicron variant of the coronavirus is now expected to be lower than initially thought, and interest rates are once again on their upward trajectory. As a result, mortgage demand fell 2.7% at the end of 2021, from two weeks earlier, according to the Mortgage Bankers Association’s seasonally adjusted index. [The MBA did not release application volume last week due to the holidays.]
The average contractual interest rate for 30-year fixed rate mortgages with compliant loan balances ($ 548,250 or less) fell to 3.33% at the end of last week from 3.27% two weeks ago, the points dropped from 0.38 to 0.48 (including fees) for loans with a 20% down payment. That rate was 47 basis points lower the same week a year ago.
As a result, mortgage refinancing requests fell 2% last week from two weeks ago and are down 40% year over year. The refinancing share of the mortgage business, however, rose to 65.4% of total applications, from 63.9% the previous week, due to continued weakness in the purchase loan market.
“Mortgage rates have continued to climb over the past two weeks as markets maintain a bullish outlook on the economy,” said Joel Kan, MBA economist. “The demand for refinancing continues to decline as many borrowers refinanced in 2020, and early 2021.”
Rates continued to climb earlier in the week, rising sharply on Tuesday to reach their highest level since early April last year, according to Mortgage News Daily, which calculates daily rates as opposed to weekly averages.
Mortgage applications for home purchases fell 4% from two weeks earlier and are down 12% year over year. This is the weakest performance since October 2021. Home sales started to decline in November, but more on low inventories than high interest rates. Home prices also continue to advance from 2020, up just over 18% in November, according to CoreLogic.
“Despite the challenges of supply and accessibility, 2021 has been a banner year for buy-outs,” Kan said. “MBA expects 2022 to be even stronger, with total purchasing activity reaching $ 1.74 trillion.”