Refinance Demand is Half What it Was a Year Ago
Demand for mortgage refinances and home purchases continued to decline last week as mortgage rates rose to the highest level in nearly three years.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume fell 4.2% compared with the previous week.
According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less rose last week to 7.49% from 7.30%, with points rising to 0.84 from 0.75, including the origination fee, for loans with a 20% down payment.
Rate-Dependent
Applications to refinance a home loan are highly rate-dependent, MBA said, and they dropped 8% for the week and were 56% lower than the same week one year ago.
As rates rise each week, the pool of eligible refinances drops, MBA noted.
“Very few homeowners have an incentive to refinance at these rates,” MBA Economist Joel Kan said in a release. “With rates roughly a percentage point higher than a year ago, refinance applications last week were at the lowest level since 2025 and fell to less than half of last year’s pace.”
MBA noted that applications for a home mortgage fell 2% for the week and were 15% lower than the same week one year ago.
Purchase Applications Fall
“Purchase activity decreased across all loan types, with FHA purchase applications falling the most, declining 6%, as these higher rates add to ongoing affordability challenges for many homebuyers,” Kan said. “As noted in recent weeks, a higher share of borrowers are opting for ARMs [adjustable-rate mortgages] to lower their initial payments, with the ARM share steady at 10.3% last week.”
What about adjustable rate mortgages? According to CNBC, adjustable mortgages offer lower interest rates but can adjust in either direction after their fixed terms. That is why they are considered riskier. As a comparison, in the first years of the pandemic, when fixed mortgage rates were hitting multiple record lows, the ARM share of applications was less than 3%, CNBC noted.
The post Refinance Demand is Half What it Was a Year Ago first appeared on The MortgagePoint.
