Mortgage demand falls additional, as rates of interest climb again to July highs

A real estate consultant shows potential buyers a condo in Miami, Florida.

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After falling again earlier this month, mortgage rates began to rise sharply again to their highest level since mid-July. This causes the demand for mortgages to decline further.

Total volume of mortgage applications fell 3.7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 63% lower than the same week last year.

The average contract interest rate for a 30-year fixed rate mortgage with a matching loan balance ($647,200 or less) increased to 5.80% from 5.65%, with points rising to 0.71 from 0.68 (including origination fees). ) for loans with a 20% reduction in payments. That rate was 3.11% one year ago.

Mortgage rates and Treasury yields rose last week as Federal Reserve officials indicated that short-term rates will remain higher for longer. Mortgage rates have been volatile over the past month, bouncing between 5.4 percent and 5.8 percent,” said Joel Kan, associate MBA vice president of economics and industry forecasts.

As a result, refinancing demand, which is highly sensitive to weekly interest rate movements, fell another 8% for the week and was 83% lower than the same week last year. The share of mortgage activity refinancing decreased to 30.3% of total applications from about 66% last year.

Mortgage applications to buy homes fell 2% for the week and 23% lower than the same week last year.

“App purchases have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook,” Kan said. “However, rising inventories and slower growth in house prices could potentially bring some buyers back into the market later this year.”

House prices are still well above last year’s levels, but down 0.77% from June to July. It was the first monthly decline in nearly three years, according to Black Knight, a mortgage, data and analytics software company.

While the decline may seem small, it was the largest one-month price drop since January 2011. It was also the second worst July performance since 1991, behind the 0.9% decline in July 2010, during the Great Recession.

Given the recent volatility in mortgage rates, the gap between jumbo and corresponding lending rates is widening again. Jumbos, which used to carry higher interest rates due to the size of the loan, are now 48 basis points lower than the corresponding loan. That spread exceeded 50 basis points in July. This is likely because the jumbo is not backed by the government, which has a tighter risk tolerance, but is deposited on the bank’s balance sheet. Banks are currently in dire need of the mortgage business.

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