Mortgage Market Takes a Breather as Rates Continue to Climb
The mortgage market experienced a rare moment of calm last week, with total application volume rising a mere 0.5% compared to the previous week. This slight increase marked the first rise in overall demand in seven weeks, according to the Mortgage Bankers Association’s seasonally adjusted index.
Rates on the Rise
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less jumped to 6.86% from 6.81%. This increase was driven by higher Treasury yields as financial markets digested the likely impacts of a Trump presidency. The Federal Reserve’s 25-basis-point rate cut had little effect on the markets.
Refinancing Slows Down
Applications to refinance a home loan fell 2% for the week, reaching the lowest level since May. Despite this decline, refinancing activity remained 43% higher than the same week one year ago, when mortgage rates were 75 basis points higher.
Purchase Applications Rise
On the other hand, applications for a mortgage to purchase a home rose 2% for the week and were 1% higher than the same week one year ago. Homebuyers may be benefiting from lower rates compared to last year, but they are also facing higher home prices and a lean supply of homes for sale.
Government-Backed Loans See Increase
Applications for loans backed by the Federal Housing Administration and the U.S. Department of Veterans Affairs helped drive stronger purchase activity, increasing 3% and 9%, respectively. FHA mortgage rates bucked the overall trend and were lower over the week, which likely helped some borrowers.
Market Volatility Continues
Mortgage rates moved higher this Tuesday, with the bond market closed Monday for the Veterans Day holiday. The market continues to work through election-related volatility, involving complex considerations such as expectations for changes in fiscal policy and traders re-setting their positions heading into the election.
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