For sale signs hang outside homes for sale in Los Angeles, California on August 16, 2024.
Patrick T. Fallon AFP | Getty Images
A sudden rise in mortgage rates has led to a drop in weekly demand from potential homebuyers and existing homeowners. Total mortgage applications fell 5.1% last week from the previous week, according to the Mortgage Bankers Association’s Seasonally Adjusted Index.
The average contract interest rate for 30-year fixed-rate mortgages with loan balances of $766,550 or less increased from 6.14% to 6.36%, and for loans with 20% down, the rate increased from 0.61 to 0.62, including origination fee payments. This is the highest rate since August.
“Mortgage rates moved higher following strong economic data last week, including the September jobs report,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
Home loan refinance applications, which have been surging for months, fell 9% this week but are still 159% higher than the same week a year ago. This time last year, mortgage rates were 131 basis points higher.
“Conventional loan refinancings tend to have larger balances than government loans and are therefore more responsive to specific changes in mortgage rates, with larger declines this week,” Fratantoni said.
Applications for mortgage loans to purchase homes were essentially flat this week, down 0.1% from the previous week. Buying demand was 8% higher than the same week a year ago. While mortgage rates are lower than a year ago, home prices are rising. Inventories have improved, but there’s still not enough product available for sale in cheaper markets.
Mortgage rates rise sharply on Friday, after a stronger-than-expected monthly jobs report, according to a separate Mortgage News Daily survey. Reports showed interest rates continued to move higher on Monday, with the current average rate on a 30-year fixed-rate mortgage sitting at 6.62%. Rates were flat Tuesday.
“While the worst may be behind us in terms of a rapid upward trend, new data will be needed to put convincing downward pressure on rates,” said Matthew Graham, chief operating officer of Mortgage News Daily.
