Mortgage refinance demand plunged 15% last week, but could now reverse

For the majority of last week, mortgage rates jumped sharply, producing a significant decline in mortgage demand, but late in the week, everything changed with the announcement of the Covid omicron variation.

According to the Mortgage Bankers Association, the average rate on a 30-year fixed mortgage with a conforming loan balance ($548,250 or less) jumped to 3.31 percent last week from 3.24 percent, with points jumping to 0.43 from 0.36 (including the origination fee) for loans with a 20% down payment. Since April of this year, the rate has been at an all-time high. One year ago, the rate was 39 basis points lower.

Applications to refinance a house loan fell 15% for the week, seasonally adjusted, due to the increase in rates.
For the Thanksgiving holiday, an additional adjustment was applied.
Demand for refinances was down 41% from the same period a year ago.
The refinance percentage of all mortgage applications fell to 59.4 percent from 63.1 percent the previous week.

“Mortgage rates increased for the third week in a row, eliminating the motivation for many borrowers to refinance.”
Over the past three weeks, rates are up 15 basis points and refinance activity has declined over 18%,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Mortgage applications for house purchases increased 5% this week and were 8% lower than a year ago.
Buyers have surprisingly returned to the market, despite the fact that this is often the start of the slower season for real estate.
According to the National Association of Realtors, pending house sales increased by an exceptionally high 7.5 percent in October compared to September, as measured by signed contracts.
According to some analysts, the threat of increased mortgage rates in the spring is driving more buyers into the market now.

The average purchase loan amount rose to $414,700, its highest level since February 2021.
This reflects not only greater property prices, but also the reality that the majority of buyers are focused on the top end of the market, where there are more properties for sale.

“As home prices continue to rise at double-digit rates, buyers of newer, more expensive homes continue to dominate purchase activity, while first-time buyer activity remains low,” Kan noted.

While rates soared for much of last week, they quickly reversed when news of the omicron variant broke on Friday.
According to Mortgage News Daily, the 30-year fixed rate had dropped 15 basis points by Tuesday.

Rates began to fall as a result of the variance, and they fell much more after Federal Reserve Chairman Jerome Powell testified before Congress on Tuesday.

“Powell’s remarks on inflation and bond purchases pushed the bond market in the opposite way.
“Mortgage-backed bonds lost all of the day’s gains, and most lenders raised rates in the middle of the day,” Matthew Graham, chief operating officer of Mortgage News Daily, wrote.

Related posts

Leave a Comment