A “For Sale” sign outside a home on Tuesday, May 31, 2022 in Albany, Calif.
David Paul Morris | Bloomberg | Getty Images
Mortgage rates declined last week, but home loan demand did not increase as a result. Other aspects of today’s housing market still outweigh the benefits of low mortgage rates, namely the lack of supply.
The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance ($726,200 or less) decreased from 6.45% to 6.40%, falling from 0.62 to 0.59 points (including origination fees) for loans below 20%. Pay for It was up from over 7% just a month ago.
Mortgage applications to buy homes fell 4% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was down 35% compared to the same week a year ago.
“Spring has arrived, but the housing market is missing the customary surge in listings and purchase activity that typically marks the season. After four weeks of rising purchase application activity, mortgage rates dropped another small this week. Volume has declined slightly since 2015,” said Mike Friantoni, chief economist at MBA.
According to Realtor.com, new listings were down 20% year over year in March, and total inventory was almost half of what it was in March 2019, pre-Covid pandemic.
“While mortgage rates corresponding to balance loans declined five basis points over the week to 6.40%, mortgage rates for jumbo loans rose nine basis points to 6.36%,” Fratantoni said. “While we have seen relative weakness at the high end of the housing market in recent months, the divergence in rates suggests that banks may tighten credit in response to recent challenges, deposit balances while maintaining balance sheet capacity.” declined.”
Most jumbo loans are placed on bank balance sheets.
Demand for Federal Housing Administration and Department of Veterans Affairs loans, which are preferred by low-income borrowers because of lower down payment requirements, declined more than for conventional loans. While there is strong demand from first-time home buyers, with millennials peaking at their buying age, affordability is still a challenge.
Applications for home loan refinance also decreased, down 5% for the week and 59% lower than the same week a year ago. The refinancing share of mortgage activity decreased from 29.1% the previous week to 28.6% of total applications. Rates are 150 basis points higher than this time last year, so there are fewer borrowers who could benefit from refinancing now.