Rates have been rising on a combination of concerns among investors
Mortgage demand in the US drops again as rates cross back over 7%
The average rate on the popular 30-year fixed mortgage crossed over 7% on Tuesday، according to Mortgage News Daily. That is the highest level since early March.
Rates have been rising on a combination of concerns among investors. First، uncertainty over what the Federal Reserve will do with interest rates، given a still strong economy; second، the battle over raising the debt ceiling and the possibility of a U.S. default.
Total volume applications dropped
Both of those already had rates climbing last week with mortgage demand pulling back. Total mortgage application volume dropped 4.6% last week، compared with the previous week، according to the Mortgage Bankers Association’s seasonally adjusted index.
Last week، the weekly average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726،200 or less) increased to 6.69% for loans with a 20% down payment، according to the MBA. That rate was 5.46% the same week one year ago.
Mortgage applications to purchase a home dropped 4% for the week and were 30% lower than the same week a year ago.
“Since rates have been so volatile and for-sale inventory still scarce، we have yet to see sustained growth in purchase applications،” said Joel Kan، vice president and deputy chief economist at MBA.
Applications to refinance a home loan decreased 5% from the previous week and were 44% lower than the same week one year ago. That is the lowest level in two months. Not only are there very few borrowers who could benefit from a refinance، given that rates were so much lower a year ago، but banks have been tightening lending due to recent bank failures.
Even if the debt crisis is resolved before a default، rates don’t have a lot of reason to move significantly lower anytime soon.
“Credit the progressive improvement in bank sentiment، mixed but resilient economic data، and a Federal Reserve that has been steadfast in its reminders about their ‘higher for longer’ rate mantra،” wrote Matthew Graham، chief operating officer at Mortgage News Daily.