A man walks into a Bank of America branch in New York.
Scott Mill | CNBC
Mortgage rates rose again last week, throwing even more cold water on demand from both current homeowners and potential home buyers. Weekly application volume fell 0.1% last week from the previous week, according to the Mortgage Bankers Association̵[ads1]7;s seasonally adjusted index.
The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 7.14% from 7.06%, with points increasing to 0.77 from 0.73 (including the origination fee) for loans at 20% decrease payment.
“Mortgage rates rose last week on news that the Federal Reserve will continue to raise short-term interest rates to combat high inflation. The 30-year fixed rate stayed above 7 percent for a third week in a row, with increases across most loan types,” said Joel Kan, MBA’s deputy chief economist.
Refinancing demand, which has been positively crushed by the sharp rise in interest rates, fell a further 4% for the week and was down 87% compared to the same week a year ago. Mortgage interest rates started this year at around 3%, so there are very few borrowers left who can benefit from refinancing at today’s higher interest rates. Refinancing demand is now at a 22-year low.
Mortgage applications increased by 1% for the week. While not a huge move, it was the first increase in six weeks. However, purchase demand is still down 41% from a year ago and near the lowest level in seven years.
The adjustable rate mortgage (ARM) share of activity increased to 12% of all applications. ARMs offer lower interest rates, and although they are considered riskier loans, their rates can be fixed for up to 10 years.
Mortgage rates have moved sideways to start this week, but that could change on Thursday as investors await the October reading from the government’s consumer price index.