A real estate agent showcases a potential buyer a home while they explore houses in Coral Gables, Florida.
Image Credit: Joe Raedle | Getty Images
The 30-year fixed-rate mortgage, which is the most popular type of mortgage, experienced its third consecutive weekly decrease in average rates. However, the demand for mortgages remained relatively unchanged.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume increased by 0.5% in the previous week compared to the week before. This followed a significant surge in demand during the preceding week.
Last week, the average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.73% from 6.77%. The points associated with these loans also dropped from 0.65 to 0.64 (including the origination fee) for loans with a 20% down payment.
“The last instance when jumbo rates were higher was in December 2021. The tightening of liquidity conditions has led jumbo lenders to withdraw and consequently increased rates,” Joel Kan, an economist at the Mortgage Bankers Association, explained in a statement.
Refinancing applications for home loans decreased by 2% this week and were 40% lower compared to the same week last year.
However, mortgage applications for home purchases saw a slight increase of 2% this week, although they were 32% lower than the same week a year ago. While homebuyers are gradually adapting to higher interest rates, the continuous decline in new listings of homes for sale is hindering overall sales. FHA loan demand surpassed conventional loan demand.
“A significant percentage of FHA purchase loans are accounted for by first-time homebuyers, and this rise signifies that although there is buyer interest, the activity remains limited due to low availability of affordable inventory,” Kan added.
This trend is favoring homebuilders. Mortgage applications for purchasing newly built homes experienced a significant jump of 17% in May compared to May 2022, according to the MBA. In line with the increased demand, single-family housing starts also rose by 18.5% in May compared to April, as confirmed by the U.S. Census.
Mortgage rates commenced this week with a slight decline, but their trajectory could be influenced on Wednesday by the reaction of investors to Federal Reserve Chairman Jerome Powell’s testimony before the House Financial Services Committee.
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