An “Open House” sign will be displayed when potential home buyers arrive at a property for sale in Columbus, Ohio.
Ty Wright | Bloomberg | Getty Images
Record low mortgage rates could now be a headline of the past.
Now several weeks of rising interest rates are flooding the incredibly high refinancing demand. According to the Mortgage Bankers Association seasonally adjusted index, the total weekly volume of mortgage applications fell 1.9% over the past week.
The average contract rate for 30 year fixed rate mortgages with conforming loan balances ($ 510,400 or less) increased from 2.88% to 2.92%, for loans with a 20% decrease from 0.33 (including the origination fee) to 0, 37% payment. The rate was 95 basis points higher a year ago.
The average rate of the 15-year fix rose to 2.48% for the first time in seven weeks.
With higher interest rates now offering less potential savings, home loan refinance requests decreased 5% in the week but were 87% higher than a year ago. That yearly comparison was over 100% just last week.
“Market expectations of a larger-than-expected fiscal relief package designed to further stimulate economic growth and lower unemployment have driven government bond yields higher in the past two weeks,” said Joel Kan, vice president of economic and industrial forecasting at MBA. “After a surge in post-vacation refinancing, higher interest rates broke off refinancing demand.”
However, demand from homebuyers rose despite the higher rates. Home purchase mortgage applications rose 3% over the week and were 15% higher than a year ago. The coronavirus pandemic resulted in strong demand for larger suburban homes. Despite the introduction of the vaccine, that demand does not seem to be easing. The biggest hurdles for homebuyers right now are high prices and record lows of homes for sale.
“Home buyers will continue to look for newer, larger homes in early 2021,” Kan said. “The average loan size for purchase credits rose to $ 384,000, the second highest in the survey,” which dates back to 1990.
The new government in Biden is preparing for several moves in the property market that could benefit both homebuyers and builders. However, mortgage rates started flat on the week as traders are likely to wait for the first major policy announcements before taking a move.