A “For Sale” sign outside a house in Albany, California, US, on Tuesday, May 31, 2022. Homebuyers are facing a worsening affordability situation with mortgage rates hovering around the highest levels in more than a decade.
Joe Raedle | Bloomberg | Getty Images
Mortgage rates experienced a second consecutive week of decline, prompting both current and prospective homeowners to reach out to their lenders.
According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage application volume increased by 7.2% last week compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased from 6.81% to 6.77% in the prior week. Points fell from 0.66 to 0.65 (including the origination fee) for loans with a 20% down payment.
While there was a 6% increase in applications to refinance a home loan for the week, numbers were 41% lower compared to the same week one year ago. Mortgage rates may have pulled back, but they remain significantly higher than they were a year ago and more than double the rates during the early years of the Covid pandemic. This has discouraged many borrowers from considering a cash-out refinance, as they currently enjoy lower rates.
Applications for mortgage purchases rose by 8% for the week, although they were 27% lower than the same week one year ago.
“Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain homebuying activity in many markets,” explained Joel Kan, an economist at the Mortgage Bankers Association, in a press release. “The average loan size for a purchase loan has decreased for the third consecutive week, indicating increased first-time homebuyer activity in the market.”
This week, mortgage rates have remained relatively stable. However, this could change following the Federal Reserve’s announcement of the results of its latest policy meeting and updated rate forecasts on Wednesday afternoon.
“Some speculate that the Fed’s forecasts will hint at another rate hike or two in 2023. While the Fed Funds Rate does not directly determine mortgage rates, such a move would undoubtedly exert upward pressure on rates of all kinds,” stated Matthew Graham, COO of Mortgage News Daily.
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