After a brief reprieve in December and January, mortgage rates are moving higher again, and that is taking its toll on mortgage demand.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.87% last week from 6.80% the week before, with points rising to 0.65 from 0.59 (including the origination fee) for loans with a 20% down payment. That is the highest rate since early December 2023.
Applications to refinance a home loan, which are most sensitive to weekly rate changes, fell 2% for the week but were 12% higher than the same week one year ago. Rates are still about one-half a percentage point higher now than they were a year ago, but the recent drop in rates from a 20-year high last fall has brought more borrowers out looking for any savings they can get. The vast majority of current borrowers, however, have loans with rates far lower than those available today.
Applications for a mortgage to purchase a home dropped 3% for the week and were 12% lower than the same week a year ago.
“Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory,” said Joel Kan, an MBA economist, in a release.
A recent report from Redfin showed an 8% drop in pending home sales over the last four weeks compared with the same period a year ago. These measure signed contracts on existing homes.