## Rising Mortgage Rates Spur Home Refinancing Demand
Mortgage rates recorded another increase last week, but this didn’t deter the demand for refinancing. In a surprising turn of events, applications to refinance a home loan climbed by 13% compared to the preceding week. This data comes from the Mortgage Bankers Association’s seasonally adjusted index.
Typically, refinancing demand and mortgage rates move in sync, but this wasn’t the case last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) surged to 7.31% from 7.27%, with points remaining steady at 0.72 (including the origination fee) for loans with a 20% down payment.
## Homeowners Rush to Refinance Amid Rate Hike Fears
The unexpected demand for refinancing may stem from borrowers’ fears that rates could escalate even further, leading them to take action now. It’s also possible that the current volume of refinances is so minimal, any minor change results in a significant percentage increase. Even with the surge, the application volume was still down by 29% compared to the same week in the previous year.
Applications for mortgage purchases also saw a modest 2% increase for the week but were 26% lower than the same week a year ago. “Purchase applications increased for conventional and FHA loans over the week,” stated Joel Kan, an MBA economist. He added that homebuyers continue to grapple with higher rates and a scant inventory of homes for sale, making purchase conditions increasingly challenging.
## Home Prices Surge as Inventory Remains Limited
Home prices have started to rise once more, and the average loan size on a purchase application has hit $416,800, marking a six-week high. This could signal a resurgence in demand as more homes have recently entered the market. However, the overall supply level remains critically low, sparking bidding wars anew.
Mortgage rates have remained relatively stable this week, as investors eagerly anticipate the outcomes of the Federal Reserve meeting and Chair Jerome Powell’s commentary on the future trajectory of interest rates.
In conclusion, the current dynamics in the housing market, with rising mortgage rates and limited inventory, continue to pose challenges for both homebuyers and homeowners seeking to refinance. As the Federal Reserve’s decisions on interest rates loom, all eyes will be on the potential impacts on mortgage rates and, by extension, the housing market.
Original Story at www.cnbc.com – 2023-09-20 11:00:01
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