Overall, mortgage demand has remained relatively steady for the past three weeks, with a slight increase in total mortgage application volume last week. The average contract interest rate for 30-year fixed-rate mortgages also increased slightly, as Federal Reserve officials reiterated a patient posture on rate cuts. Despite inflation being above target and strong employment data, the broader economy continues to show resiliency. This has led to an increase in applications to refinance home loans, as homeowners may have been waiting for rates to go even lower before committing.
Applications for refinancing a home loan saw a significant 10% jump for the week and were 4% higher than the same week last year. Refinance demand typically drops when rates rise, but with rates falling slightly in previous weeks, some homeowners may have been waiting for further decreases. However, when rates rose last week, they may have felt a sense of urgency to secure savings while they could. Conversely, applications for mortgages to purchase a home fell 5% for the week and were 23% lower than the same week one year ago, indicating a slowdown in the homebuying market despite high demand and limited inventory.
As the spring market unfolds, inventory remains low despite slight increases compared to the previous year. Home prices show no signs of cooling down, further complicating the homebuying process for potential buyers. Investors are closely monitoring the forthcoming consumer price index report, set to be released on Wednesday, as it serves as an indicator of inflation. Depending on the outcome of this report, mortgage rates could see a significant shift in either direction, impacting both potential homebuyers and those looking to refinance existing loans.
The Mortgage Bankers Association reported a seasonally adjusted index increase of 0.1% in total mortgage application volume compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances also saw a slight increase to 7.01%. This increase can be attributed to the patient stance on rate cuts by Federal Reserve officials, strong employment data, and inflation levels above the Fed’s target, which have collectively put upward pressure on rates.
Despite the steady demand for mortgages, the split between those seeking to purchase a new home and those aiming to refinance existing loans is evident. The slight increase in mortgage rates last week may have prompted homeowners to refinance sooner rather than later, while the decline in applications for home purchases suggests a cooling housing market. With investors eagerly awaiting the consumer price index report, the direction of mortgage rates in the coming days remains uncertain, further complicating decisions for potential homebuyers and homeowners looking to refinance.
