Mortgage rates dropped for much of last week, causing total mortgage application volume to surge nearly 16% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
But rates jumped back up again after a stronger-than-expected monthly employment report Friday.
For the week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.02% from 7.07%, with points unchanged at 0.65 (including the origination fee) for loans with a 20% down payment. For the bulk of the week, rates were lower than that, but Friday’s news caused rates to jump 12 basis points, according to a separate survey from Mortgage News Daily.
Applications to refinance a home loan, which are most sensitive to daily moves in interest rates, climbed 28% last week compared with the previous week and were also 28% higher than the same week one year ago.
“Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates,” said Mike Fratantoni, senior vice president and chief economist at the MBA.
Applications for a mortgage to purchase a home rose 9% for the week, but were still 12% lower than the same week one year ago. Homebuyers are not only contending with high interest rates but also high home prices. Inventory has also been lean. A monthly survey from Fannie Mae found 86% of consumers say now is a bad time to buy a home.
“Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market,” Fratantoni said.
Mortgage rates didn’t move much at the start of this week, as investors are waiting for the results of a monthly inflation report, the consumer price index, as well as the outcome of the Federal Reserve meeting, both happening later Wednesday.
“The Fed will neither cut nor hike rates, but they’ll update their outlook for the rest of the year (and the coming years),” wrote Matthew Graham of Mortgage News Daily. “CPI is the most important event of the day, to be sure, but the Fed’s interpretation of the data could either accelerate or push back against whatever the morning momentum proves to be. Either way, volatility is much more likely than it has been so far this week.”