Over the course of the last week, mortgage rates have seen a steady increase, reaching levels that haven’t been seen since November. This rise in rates has resulted in a 2.7% decrease in mortgage application demand compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances has gone up to 7.24%, along with an increase in points to 0.66. This trend has affected the demand for both home loan refinancing and new home purchase applications.
The increase in mortgage rates has had a noticeable impact on the volume of applications for refinancing home loans, with a decrease of 6% compared to the previous week. On the other hand, applications for mortgages to purchase a home have also fallen by 1%. This decline can be attributed to the decreasing affordability of homes, as rising prices and interest rates have negatively affected potential buyers’ purchasing power.
In response to the rise in interest rates, there has been a notable increase in the share of adjustable-rate mortgage (ARM) applications, accounting for 7.6% of total applications. ARMs are an attractive option for borrowers due to their lower initial rates and the ability to fix rates for a period of time. However, they are considered riskier compared to fixed-rate mortgages. As affordability becomes a concern for many buyers, ARMs are becoming a more popular option in the current market.
Although mortgage rates have slightly eased in the current week, there hasn’t been significant economic data to provide a clear outlook for the future. The trend of rising rates is concerning for potential buyers, as it limits their purchasing power and ability to enter the housing market. As home prices continue to rise in conjunction with interest rates, the affordability of homes will be a key factor in determining the future of the housing market.
The increase in mortgage rates over the past week has had a notable impact on the housing market, with decreased demand for both refinancing and new home purchase applications. Potential buyers are facing challenges due to reduced affordability and limited supply, prompting a shift towards adjustable-rate mortgages as an alternative. The future trajectory of mortgage rates will play a crucial role in shaping the dynamics of the housing market in the coming months.