The mortgage market was feeling the effects of higher interest rates.
According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of mortgage applications fell 1.1% from the week before, despite gains in the previous week.
Average contract interest rates for 30-year fixed rate mortgages with conforming loan amounts of up to $548,000.25 increased to 3.10%, from 3.03%. For loans with 20% down payment, the points, which include origination fee, increased to 0.34 from 0.30.
After last week's FOMC meeting, Treasury yields rose due to increased optimism about the strength and stability of the economy. "Mortgage rates rose across all types of loans, with the benchmark 30-year fixed interest rate at its highest since early July 2021," Joel Kan, MBA's associate vice-president for economic and industry forecasting, said.
Refinance applications for home loans, which are sensitive to weekly rate movements and can be very sensitive to them, fell 1% this week. They were basically flat from one year ago. The week ended with an increase in interest rates, which continued into the week. This suggests that the negative impact on refinance demand in next week's report will be even more severe.
Last week, mortgage applications for purchasing a home declined by 1% and were 12% less than one year ago. Rising interest rates are not the reason for weaker purchase demand, although they are historically low. It is more due to sky-high home prices.
According to the most recent S&P CoreLogic Case-Shiller Home Price Index, prices rose 19.7% in July compared to June's 18.7% increase. This is another record-breaking increase.
"With home-price appreciation increasing at a rapid pace, exceeding 19 percent annually in July," Kan said. Applications for larger loan amounts are outpacing those for lower-balance loans. Kan stated that the average loan amount for a purchase application was $410,000. This is its highest level since May 2021.
Because sales have fallen and there is more supply, price gains will soon slow down. Moreover, rising prices will be fueled by higher mortgage rates. Potential buyers would have to pay more monthly.
