After rising sharply for weeks, mortgage interest rates briefly steadied last week, and homebuyers responded.
Total mortgage application volume increased 2.7 percent from the previous week, the Mortgage Bankers Association said Wednesday in its seasonally adjusted report. Compared with a year ago, however, volume was 2.4 percent lower.
The week-over-week increase was driven by homebuyers, who have been sidelined significantly this year by a record low number of listings and by weakening affordability. Home prices continue to rise faster than wages and inflation, and higher interest rates have reduced buying power.
Mortgage applications to purchase a home rose 6 percent for the week but were just 3 percent higher than a year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged from last week at 4.64 percent, with points increasing to 0.63 from 0.61 (including the origination fee) for 80 percent loan-to-value ratio loans.
Interest rates have been on the rise since the start of this year, and were volatile last week, despite finally ending unchanged.
“Rates moved higher last week as the minutes from the latest FOMC meeting indicated a positive view of the economy overall and firming inflation. Mortgage rates for three of the five loan types that we track in the survey increased over the week,” said Joel Kan, an MBA economist. “The refinance share of all applications dropped to 41.8 percent, its lowest share since May 2017 as we move further into a purchase-dominated market.”
Applications to refinance a home loan fell 1 percent for the week and were down nearly 10 percent from a year ago, when interest rates were lower. Refinancing is quickly drying up amid higher interest rates, as fewer homeowners want to lose the low rates they may already have, even in return for pulling cash out of their homes in the refinance.
The rate respite, however, was short-lived. Mortgage rates moved higher this week, following the new Federal Reserve Chairman Jerome Powell’s first testimony before Congress.