The latest data from the Mortgage Bankers Association revealed that mortgage rates are now falling, but the decline has had little impact on mortgage demand.
The numbers from the Mortgage Bankers Association revealed a reversal of a three-week trend that had mortgage rates on the rise. Now, the numbers reflect that the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.03% from 3.06%, with points falling to 0.29 from 0.34 (including the origination fee) for loans with a 20% down payment.
“Treasury yields fell last week, as investors continue to anxiously monitor if the rise in COVID-19 cases in several states starts to dampen economic activity. Mortgage rates slightly declined as a result, with the 30-year fixed-rate decreasing for the first time in three weeks. Lower rates led to an increase in refinance applications, with government loan applications jumping 10 percent to the highest level since May 2021,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Alongside the decrease in rates, the report also revealed that the Market Composite Index, a measure of mortgage loan application volume, increased 1.6% on a seasonally adjusted basis from one week earlier. Those same numbers on an unadjusted basis showed that the Index increased 1% compared with the previous week.
Meanwhile, the Refinance Index increased 1% from the previous week’s numbers and showed decent growth from the same week a year ago, coming in 3% higher. The Refinance Index numbers are highly sensitive and reflect that many borrowers already refinanced their homes at even lower rates last fall.
The seasonally adjusted Purchase Index increased 3% from one week earlier, while the unadjusted Purchase Index increased 1% compared with the previous week. The Purchase Index was significantly different from the same week a year ago, with its 2021 numbers coming 16% lower than the same week in 2020.
“Purchase applications for both conventional and government loans also increased. The purchase index was at its highest level since early July, despite still continuing to lag 2020’s pace. There was also some easing in average loan sizes, which is potentially a sign that more first-time buyers looking for lower-priced homes are being helped by the recent uptick in for-sale inventory for both newly built homes and existing homes,” said Kan.
The difference between the Purchase Index this year compared to 2021 is starting to show the reality of home prices. Many potential home buyers are facing prices that far exceed their budget, preventing them from making purchases. This affordability wall is coupled with a home supply far too low to meet demand.
Home prices hit record highs this past year, rising by a record 16.6% over the past year that ended in May. The Federal Housing Finance Agency reported that the numbers in 2021 are the highest home prices on record.
The Mortgage Bankers Association report covers over 75% of all U.S. retail, residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts.
