Mortgage demand is recovering slightly, despite higher interest rates

A “For Sale” sign outside a home in Atlanta, Georgia, on Friday, February 17, 2023.

Dustin Chambers | bloomberg | Getty Images

After falling to a 28-year low in the previous week, mortgage demand has rebounded slightly, despite higher interest rates.

Total mortgage application volume rose 7.4% last week, according to Mortgage Bankers AssociationSeasonally adjusted index.

This happened even as the average contract interest rate for 30-year fixed-rate mortgages with matching loan balances ($726,200 or less) rose to 6.79% from 6.71%, with the score rising to 0.80 from 0.77 (including origination fees). For loans with 20% down payment. This is the highest level since November 2022 and 270 basis points higher than last year.

“Even with the high rates, there was a slight increase in applications last week, but this was compared to two weeks of dips to very low levels, including a holiday week,” noted Joel Kahn, an MBA economist.

Home loan refinance applications jumped 9% week over week but were 76% lower than the same week one year ago. At last week’s rate, there were barely 200,000 borrowers who could get monthly savings from a refinance, compared to more than 2 million borrowers who would have benefited at the rate one year ago, according to calculations by Black Knight, a mortgage data and analytics company.

Mortgage applications for a home were up 7% for the week and were 42% lower than in the same week a year ago. There’s more inventory on the market now than there was last year, but new listings are still thin, suggesting what’s on sale isn’t selling out very quickly.

The jump in demand could be just the beginning of a traditionally crowded spring market. However, the share of adjustable rate mortgage applications rose last week, suggesting that more buyers are seeking to pick up costs in what is still an expensive housing market today. ARM offers lower interest rates with higher risks.

Mortgage rates have climbed even higher, topping 7%, according to a separate survey from Mortgage News Daily. Federal Reserve Chairman Jerome Powell on Tuesday told lawmakers on Capitol Hill that rate hikes could accelerate again. This spooked investors and sent bond yields soaring. Mortgage rates loosely track the yield on a 10-year Treasury note.

“Although Fed Chair Powell said nothing new or significantly different, markets have read enough to change the course of the Fed funds rate outlook in a meaningful way,” said Matthew Graham, chief operating officer of Mortgage News Daily. .