Mortgage interest rates soared across the board last week, with the rate on the government’s low down payment option increasing to the highest level in 21 years. That hit mortgage demand hard, with total application volume dropping 3.1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.09% from 6.93%, with points rising to 0.70 from 0.68 (including the origination fee) for loans with a 20% down payment. The average rate for jumbo loans hit 7.04%.
The rate on Federal Housing Administration loans, which are favored by first-time or lower-income borrowers because they offer low down payments, hit 7.02%, the highest since 2002.
“Treasury yields rates rose last week and mortgage rates followed suit, due to a combination of the Treasury’s funding announcement and the downgrading of the U.S. government debt rating,” said Joel Kan, vice president and deputy chief economist at MBA.
Applications for a mortgage to purchase a home dropped 3% for the week and were 27% lower than the same week one year ago. High mortgage rates are not only making it harder to afford a home, they’re keeping current homeowners in place. Today’s homeowners who have mortgages are paying interest rates in the 3% to 4% range and are putting off a move because they don’t want to pay twice that on another home.
Applications to refinance a home loan fell 4% for the week and were 37% lower than the same week one year ago.
Mortgage rates have held over 7% to start this week, according to a separate survey from Mortgage News Daily. Rates could see a much bigger move Thursday with the release of the monthly inflation data.
Read the full article here
