Last week, mortgage interest rates rose to the highest level since early May, leading to a decrease in mortgage demand for the second consecutive week. The Mortgage Bankers Association reported a 5.2% decline in total mortgage application volume compared to the previous week, with an adjustment made for the Memorial Day holiday. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased slightly to 7.07% from 7.05%, with points increasing to 0.65 from 0.63 for loans with a 20% down payment. Despite some data suggesting slower economic growth, mortgage rates continued to rise, impacting demand for refinancing and home purchases.
Refinancing applications saw a 7% decrease from the previous week, but were still 5% higher than the same period last year. While mortgage rates are slightly higher than a year ago, some borrowers are still opting to refinance to access home equity. Applications for purchasing a home fell by 4% for the week and were 16% lower than the same week last year. In addition to higher interest rates, homebuyers are facing rising home prices and intense competition, especially in the lower end of the market. Government purchase volume was down less than other categories, with VA applications experiencing growth as the market looks to first-time homebuyers for demand.
Following a sharp drop in mortgage rates on Friday, rates continued to slide in the following week. A report released on Tuesday showed lower than expected job openings in April, which typically indicates lower rates. The monthly employment report due to be released on Friday is expected to have a significant impact on future interest rates, with the potential for data surprises leading to volatility in rates. Analysts like Matthew Graham of Mortgage News Daily are cautious about the possibility of data exceeding expectations and causing rates to bounce back towards higher levels. The market remains sensitive to economic indicators and data releases that could influence interest rates.
Despite some recent fluctuations, mortgage rates have generally been on the rise, reaching their highest level in several months. This has had a direct impact on mortgage demand, with both refinance and purchase applications seeing declines in recent weeks. Homebuyers facing higher interest rates must also contend with rising home prices and fierce competition in the housing market. The market is leaning on first-time homebuyers, who often utilize government lending programs, to drive demand and offset some of the challenges brought on by higher rates. As the market remains sensitive to economic data and potential surprises, borrowers and potential homebuyers should stay informed and prepared for potential changes in interest rates in the coming weeks.
