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A “for sale” sign hangs in front of a home on June 21, 2022 in Miami, Florida.
Joe Raedle | Getty Images
Rising mortgage rates and a severe shortage of homes for sale are weighing on mortgage demand.
Mortgage applications to buy a home fell 4.8% last week, compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 26% lower than the same week a year ago.
“Buy orders declined at the slowest pace in a month as buyers remain wary of this rate volatility, but also as inventory for sale in many parts of the country remains scarce,” Joel Kan wrote. , an MBA economist, in a statement.
The average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 6.48% to 6.57%, with points remaining at 0.61 (including origination fees) for loans with a 20% down payment. This is the highest rate in two months. The 30-year fixed stood at 5.49% the same week a year ago.
Mortgage rates rose last week, even as Treasury yields were essentially flat, with the spread between the two rates widening to 310 basis points.
“Mortgage rates have generally struggled relative to Treasuries since the Fed stopped reinvesting proceeds from its bond portfolio at the end of 2022,” said Matthew Graham, chief operating officer. “More recently, the high supply of mortgage debt due to various FDIC liquidation efforts has weighed on the sector.”
Home loan refinance applications fell 8% for the week, as refinances are much more sensitive to weekly rate changes. Demand was down 43% year over year. With rates more than double what they were in the early years of the Covid pandemic, there are very few borrowers left who can benefit from refinancing.