Mortgage Applications Decline with Interest Rate Uplift After 9-Week Dip

After weeks of growing demand, the mortgage market took a hit as interest rates climbed last week. The rise in mortgage rates, coupled with looming economic uncertainties, could be key factors.

The Mortgage Bankers Association reported a decrease of 6.2% in total mortgage applications compared to the preceding week, as identified by their seasonally calibrated index.

For 30-year fixed-rate mortgages with conforming loan totals of $806,500 or less, the average interest rate went from 6.67% to 6.72%, with points climbing from 0.63 to 0.64, inclusive of the origination fee, on deals requiring a 20% deposit. This marks the first rise in the past nine weeks. The previous year at this time, rates were higher by 25 basis points.

Refinancing Impact and Purchase Applications

Refinancing mortgage applications saw a sharp 13% decrease this week, even though they're still 70% higher than they were during the same week last year. The compelling gains in refinancing earlier this month were due to falling interest rates, though few homeowners stand to benefit from refinancing today owing to exceptionally low rates three years ago, which has skewed the numbers due to the small base volume.

In contrast, requests for home purchase mortgages remained largely unchanged, seeing a barely noticeable increase of 0.1% week-over-week. However, they have risen by 6% compared to last year’s figures.

Mike Fratantoni, MBA's Senior Vice President and chief economist, noted, "Purchase application numbers advanced slightly to the zenith seen over the past six weeks, predominantly spurred by a 3% rise in FHA purchase applications." He further added that an increasing inventory of listed homes and stable mortgage rates have encouraged steady buying activity this spring.

Current Rate Trends and Potential Shifts

As this week commenced, mortgage rates dipped slightly, according to data from Mortgage News Daily, yet they have been oscillating within a narrow 10 basis point range for nearly three weeks. However, this trend might undergo alterations based on the Federal Reserve's latest rate announcements and unanticipated statements from its chair.