Mortgage Demand Rises for the First Time in Six Weeks

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The 30-year fixed-rate mortgage average contract interest rate for conforming loan sums of $647,200 or less climbed to 6.25% from 6.01%.

Applications to refinance a house loan, which are often particularly susceptible to large rate fluctuations, increased 10% for the week, but remained 83% lower than the same week a year ago.

Mortgage applications for home purchases jumped 1% last week, but were 30% lower than the same period a year earlier.

Despite a hike in interest rates, mortgage application volume climbed for the first time in six weeks last week, according to the Mortgage Bankers Association.

Rate swings are anticipated, as is uncertainty about the overall direction of the housing market.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $647,200 or less rose to 6.25% from 6.01%, with points falling to 0.71 from 0.76 (including the origination fee) for loans with a 20% down payment.

“Treasury yields continued to rise last week in preparation of the Federal Reserve’s September meeting, where it is believed that they would announce – in their efforts to contain inflation – another large short-term rate hike,” Joel Kan, an MBA economist, said in a release.

Applications to refinance a house loan, which are often particularly susceptible to large rate fluctuations, increased 10% for the week, but remained 83% lower than the same week a year ago. Part of that could be attributed to the prior week’s holiday adjustment. It’s also possible that the few remaining borrowers who could profit from a refinance finally got off the fence, realising that rates could rise significantly higher in the near future.

Despite increased rates, the weekly increase in applications highlights the overall volatility right now, as well as the prior week’s Labor Day-adjusted results,” Kan added.

Mortgage applications for house purchases increased 1% for the week, but were 30% lower than the same period last year. Buyers are finding less competition in today’s overpriced market, so some may be taking advantage of the opportunity. Homes are on the market for longer periods of time, and sellers are significantly more eager to haggle than they were even three months ago.

Still, prices have not fallen significantly, and with interest rates as high as they are now, affordability is historically low. The slight weekly increase in mortgage demand does not reflect the severe decline in homebuying.

Mortgage rates rose considerably higher this week, according to a separate Mortgage News Daily poll. On Tuesday, the average 30-year fixed rate was just around 6.5%, ahead of the highly anticipated Federal Reserve meeting on Wednesday. Investors will be looking for commentary on what may come next, rather than on the current rate hike.

The forecasts will increase any volatility that currently exists as a result of the rate hike decision. Furthermore, [Fed Chairman Jerome] Powell’s press conference has the potential to create further volatility,” noted Matthew Graham, chief operating officer of Mortgage News Daily.

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