Mortgage Rates Surge, Demand Drops
The mortgage market experienced a significant shift last week, as rates climbed and overall demand fell. According to the Mortgage Bankers Association, total application volume decreased by 0.7% compared to the previous week, breaking a five-week streak of growth.
Refinance Demand Takes a Hit
The primary driver of this decline was refinance demand, which dropped 3% for the week. Although refinance volume remains 41% higher than the same week last year, the slight increase in rates seems to have had a disproportionate impact. This could be due to the fact that refinance volume is generally low, making even small changes appear more significant.
Purchase Applications Buck the Trend
On the other hand, applications for mortgages to purchase a home increased by 1% for the week, driven by conventional and VA loan demand. This growth is attributed to improving inventory conditions and a more optimistic outlook on the economy and job market. Purchase activity is now 6% higher than the same week last year.
Rates Hold Steady Ahead of Fed Meeting
As the market awaits the Federal Reserve meeting this week, mortgage rates have remained relatively flat. A rate cut is expected, but some analysts predict it may be the last one for a while. The outcome of the meeting will likely influence the direction of mortgage rates in the coming weeks.
What’s Next for Mortgage Rates?
The uncertainty surrounding the Fed’s rate outlook survey and the potential for a more hawkish tone from Chairman Powell have left markets on edge. As the mortgage market navigates these changes, one thing is clear: borrowers should be prepared for a potentially volatile rate environment in the coming months.
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