People wait to visit a house for sale in Floral Park, Nassau County, New York.
Wang Ying | Xinhua News Agency | Getty Images
It was a mixed bag for mortgage demand last week, as higher rates did nothing for refinances and homebuyers faced more steep competition for a pitiful few homes for sale.
Total mortgage application volume fell 0.9% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) moved very slightly higher to 3.18% from 3.17%. Points increased to 0.34 from 0.30 (including the origination fee) for loans with a 20% down payment.
With no particular incentive to make a move, demand for mortgage refinances was essentially flat, rising 0.1% from the previous week. Application volume was 17% lower than the same week one year ago, even though rates were higher a year ago. That may be because so many borrowers have already refinanced at the record low rates seen last fall. The refinance share of mortgage activity increased to 61% of total applications from 60.6% the previous week
Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, fell 3% for the week. They were 24% higher than the same week one year ago, but that annual comparison is skewed. The housing market stalled in April and May of last year, when the pandemic started, and then rebounded dramatically in the summer.
“Both conventional and government purchase applications declined, but average loan sizes increased for each loan type,” noted Joel Kan, an MBA economist. “This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity.”
Higher prices and differing supply are also affecting the mix of activity, with much more growth in purchase loans with larger-than-average balances. Home sales on the high end of the market are soaring because there is far more available for sale. The housing shortage is most acute on the low end, where demand is strongest.
So far this week, mortgage rates have not moved much, but that is likely to change with new economic data coming out. Employment reports on Thursday and Friday could move interest rates in either direction.