Borrowers backed away from the mortgage market last week, as higher interest rates chilled a recent revival in refinances.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.06% from 2.99%, with points increasing to 0.34 from 0.30 (including the origination fee) for loans with a 20% down payment.
“Mortgage rates followed an overall increase in Treasury yields last week, which started higher from the strong July jobs report before slowing because of weaker consumer sentiment and concerns about rising Covid-19 cases,” said Joel Kan, the Mortgage Bankers Association’s associate vice president of economic and industry forecasting.
Applications to refinance a home loan, which are highly rate-sensitive, fell 5% last week from the previous week and were 8% lower than a year ago, according to the MBA’s seasonally adjusted index. Mortgage rates are very slightly lower than they were last August but not as low as they were last fall, when there was a mini refi boom. As a result, the eligible pool of homeowners who stand to benefit from a refinance is smaller now.
Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, fell 1% for the week and were 19% lower than a year ago. Homebuyers have been pulling back for several weeks now, as affordability weakens and the supply of homes for sale improves only slightly.
“Despite a second-straight weekly decrease, average loan sizes remain close to record highs. This is a continuing sign that sales prices are still elevated, driven by stiff competition leading to accelerating home-price growth,” Kan said.