Mortgage applications drop as interest rate worries mount

Mortgage application volume first decline in three weeks As previous predictions of a rate correction appear to be on hold.

The Mortgage Bankers Association’s Market Composite Index, a measure of weekly loan application activity based on a survey of members of the industry group, fell a seasonally adjusted 1.6% in the period ended March 15. The index fell after two weeks of gains, including a 7.1% increase in the last survey, but sales were down 11.5% from a year earlier.

“Mortgage applications continue to show sensitivity to interest rate changes, with both purchase and refinance activity increasing this week,” Joel Kan, MBA vice president and deputy chief economist, said in a release. decline.”

February Inflation Report Kan said interest rates were higher than expected, leading to growing uncertainty about when central bankers might lower the federal funds rate in 2024. Investor activity following the release of economic data has sent mortgage rates higher, and there is growing consensus that the federal funds rate will not be lowered until this summer at the earliest.

No rate cut is expected at this week’s Federal Open Market Committee meeting.

30-year fixed rates below $766,550 surged to an average of 6.97% in most markets after three weeks of declines. Seven days ago, the average interest rate was 6.84%. At the same time, the number of points used to help lower interest rates fell slightly for 80% loan-to-value applications, from 0.65 to 0.64.

Driven by recent stronger-than-expected economic data Fannie Mae raises 2024 interest rate forecast The government-sponsored enterprise’s chief economist said interest rates may not fall below 6% until at least the end of 2025, bucking previous forecasts and dimming hopes for consumers who expected some relief this year.

Rising interest rates last week caused the MBA Purchase Index to fall a seasonally adjusted 1.2%, with purchases also down 13.8% compared to the same week in 2023.

high interest rate environment and Ongoing inventory shortages This means that there is little price relief in the current market and opportunities for homebuyers are scarce. Naoto Kan said, “Due to low housing supply and high prices, the average loan size for home purchase applications increased to the highest level since May 2022.”

The average amount of new purchase applications last week was $445,000, rising for the third consecutive survey period. By comparison, the average purchase loan size starting in 2024 is $402,900.

Meanwhile, the refinancing index fell 2.5% after rising 12.2% a week ago. As most borrowers have kept interest rates below current levels, refinancing activity remains subdued, down 2.9% from a year ago. Refinancing activity also fell to 31.2% relative to total transaction volume after gaining 31.6% share seven days ago.

The seasonally adjusted Government Market Index also fell 1.8% last week, although purchases rose slightly. The share of federally backed loan activity was unchanged from the previous survey, with FHA-guaranteed applications attracting 12.1% of transaction volume, up from 12%. The increase was offset by a decline in VA-insured mortgages to 12.1% from 12.2% weekly. The share of loans generated by the USDA program is also 0.5%.

In addition to consistent average rates, MBA Lenders’ fixed mortgage rates fell across the board, with the 30-year jumbo average jumping 10 basis points to 7.14% from 7.04% a week ago. The interest rate for an 80% LTV ratio loan increased from 0.38 to 0.54.

The average fixed rate for FHA-backed 30-year mortgage applications increased 12 basis points to 6.89% from 6.77%. Borrowers used 1.04 points to lower their rates from 0.95 points in the previous seven-day period.

At the same time, the average interest rate on the 15-year fixed contract surged from 6.37% to 6.49%, and the point value fell 7 basis points from 0.77 to 0.7.

MBA’s 5/1 adjustable mortgage rate recorded its only decrease last week, falling from an average of 6.38% to 6.33%. Loan points start fixed for 60 months and then adjust based on market levels, from 0.52.

ARM Index, you will typically see When fixed rates rise, activity increases, bucking the trend and falling 7.3%. Adjustable-rate mortgages also fell to 7.2% of total applications from 7.7% seven days ago.

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