Mortgage Market Update: Higher Interest Rates Continue to Dampen Demand
The latest mortgage application data reveals a continued slowdown in demand, with both homebuyers and current homeowners struggling to cope with higher interest rates. According to the Mortgage Bankers Association, total mortgage application volume decreased by 2% from the previous week, marking a worrying trend.
Interest Rates Remain Unchanged, But Points Increase
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained steady at 7.02%. However, points increased to 0.63 from 0.62, including the origination fee, for loans with a 20% down payment. This means that borrowers are facing higher upfront costs, making it even more challenging to secure a mortgage.
Refinancing Activity Takes a Hit
Applications to refinance a home loan plummeted by 7% for the week, and were only 5% higher than the same week one year ago. With interest rates now 24 basis points higher than they were a year ago, few homeowners can benefit from refinancing. The majority of homeowners have mortgages with rates well below what is being offered today, making refinancing an unattractive option.
Purchase Applications See a Slight Dip
Applications for a mortgage to purchase a home fell by 0.4% from one week earlier and were 7% lower than the same week one year ago. However, there was a silver lining – applications for FHA purchase loans increased by 2%, providing a glimmer of hope for first-time homebuyers.
Experts Weigh In on the Future of Mortgage Rates
Industry experts believe that mortgage rates will continue to stabilize, and if for-sale inventory loosens, we can expect a gradual pick-up in purchase activity in the coming months. The Federal Reserve meeting on Wednesday is not expected to bring any surprises or tradeable news, which should help maintain stability in the mortgage market.
What’s Next for the Mortgage Market?
As the mortgage market continues to navigate the challenges posed by higher interest rates, it’s essential to stay informed about the latest trends and developments. With the Federal Reserve meeting out of the way, attention will turn to the next set of economic indicators, which will provide valuable insights into the direction of mortgage rates.
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