June 13, 2024

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Weekly mortgage demand is rising, driven by a strange rise in refinancing

Weekly mortgage demand is rising, driven by a strange rise in refinancing

  • Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) rose to 7.31% from 7.27%.
  • Home loan refinancing applications jumped 13% last week compared to the previous week.
  • Home mortgage applications rose 2% during the week and were 26% lower than the same week a year ago.

A For Sale sign in front of a home in Arlington, Virginia, on August 22, 2023.

Andrew Caballero Reynolds | AFP | Getty Images

Mortgage rates rose again last week, as did demand for refinancing, which doesn’t seem logical on its face.

Home loan refinancing applications jumped 13% last week from the week before, according to the Mortgage Bankers Association’s seasonally adjusted index. Order volume is still 29% lower than the same week one year ago.

Refinancing demand usually moves in the opposite direction to mortgage rates, but that is not the case. Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) rose to 7.31% from 7.27%, with points remaining unchanged from 0.72 (including origination fees). For loans with an interest rate of 20%. Initial payment.

Borrowers may be concerned that interest rates could rise even higher, so they are jumping in now. It may also be that the number of refinances is so small at the moment that even a small change will result in a large percentage.

Home mortgage applications rose 2% during the week and were 26% lower than the same week a year ago.

“Purchase orders for conventional and FHA loans increased throughout the week,” Joel Kahn, an MBA economist, said in a news release. “Homebuyers continue to face higher prices and limited inventory for sale, which has made purchasing conditions more difficult.”

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With home prices now rising again, the average loan size for purchase applications reached $416,800, the highest level in six weeks. Demand may be returning, as more homes have come on the market recently. However, the overall level of supply is still very low, leading to bidding wars again.

Mortgage rates haven’t moved much this week, as investors wait to hear the results of Wednesday’s Federal Reserve meeting and Chairman Jerome Powell’s comments about the future of interest rates.