Interest Rate Boost to 7% Impacts Mortgage Demand
There has been a noteworthy shift in the weekly mortgage demand due to the recent surge in interest rates to 7%. This development, has led to a substantial deceleration in application volume. As per the findings delivered by our reliable sources, the total mortgage application volume underwent a 5.6% dip last week compared to the prior week, after adjusting for the Presidents Day holiday.
Average Contract Interest Rate Exhibits Little Decline
The average contract interest rate for 30-year fixed-rate mortgages, specifically those with conforming loan balances, underwent a meagre reduction to 7.04% from 7.06%. However, the minor decline was unable to kickstart demand as desired. Furthermore, Refinance applications registered a 7% fall from the preceding week, marking a 1% drop from the same week, a year ago.
Downfall in FHA and VA Refinances
The downfall was particularly noticeable in FHA and VA refinances. These refinances are customarily preferred by lower-income borrowers due to the reduced down payment requirements. In addition to this, purchase applications declined by 5% within the week and were 12% less compared to the corresponding week a year ago.
19% Year-Over-Year Surge In Demand for New Homes
Despite the comprehensive decline, a significant 19% year-over-year surge in mortgage demand for newly developed homes in January was reported. This indicates the persisting issue of meagre existing inventory as a prime obstacle in increasing purchase volume.
Mortgage Rates Soar above 7%
While the insufficient inventory remains a concern, the current mortgage rates soaring above 7% is also inhibiting potential buyers. The mortgage rates are on an upward trajectory, reaching the peak levels that were last spotted in early December 2023.