Mortgage rates fall for the third week in a row, but demand continues to fall

A “For Sale” sign appears in front of a house on Oak Street in Patchogue, New York on May 17, 2022.

Steve Pfost | News | Getty Images

Mortgage rates rose over 7% just a month ago, but have since fallen by more than half a percentage point. However, mortgage applications fell 0.8% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The results also include an adjustment for Thanksgiving observance.

The average contractual interest rate for 30-year fixed-rate mortgages with a qualifying loan balance ($647,200 or less) decreased to 6.49% from 6.67%, with scores remaining at 0.68 (including fees). per issuance) for loans with a 20% down payment.

Weakness continues to fuel refinancing demand, which fell 13% from the previous week and was 86% lower than the same week a year ago. Odd, given that roughly 100,000 more current borrowers could now benefit from refinancing with the latest rate cut, according to Black Knight.

Mortgage applications to buy a home rose 4% from the previous week, but demand was 41% lower than the same week a year ago. Existing home sales continue to fall, while new home sales benefit from developer concessions, in particular deals where the developer buys at the mortgage rate.

“The economy here and abroad is weakening, which should lead to a slowdown in inflation and allow the Fed to slow down the pace of rate hikes. Buying activity picked up slightly after adjusting for the Thanksgiving holiday, but the rate cut still wasn’t enough to bring back refinancing activity,” said MBA economist Joel Kahn.

The share of adjustable-rate mortgages in application activity increased slightly to 9%, down from a range of about 12% a month ago when rates were higher. However, ARM’s share was around 3% earlier this year when the 30-year fixed rate hovered around a record low. ARM offers lower interest rates but higher risk.

Mortgage rates didn’t move much at the beginning of this week, but the situation may change by the end of the week, as the long-awaited monthly employment report is expected to be released. Any unanticipated swing in either direction will have a direct impact on mortgage rates.

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