A sign is placed in front of a house for sale in San Anselmo on September 28, 2021.
Another drop in mortgage demand was caused by rising mortgage interest rates. This affected both home and refinance loans. According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of applications fell 6.3% last Wednesday compared to the previous week.
The average 30-year fixed rate mortgage interest rate with conforming loan balances of $554,250 or less increased to 3.23% from 3.18. Points decreased to 0.35 from 0.37 (including origination fee) for loans that have a 20% downpayment. This rate was 21 basis point lower than the previous week.
The 30-year fixed rate rose 20 basis points in the last month, and is now at its highest level since April.
Refinance applications for a home loan were down 7% in the week, and 22% more so year-over-year. Refinance activity declined to 63.3% from 63.9% last week.
Joel Kan, MBA's associate Vice President of Economic and Industry Forecasting, stated that "refinance applications fell for the fourth week, as rates rose, bringing down the refinance indicator to its lowest level since August 2021."
The week's mortgage applications for home purchases dropped by 5% and were 12% lower than the previous year. Because home prices are high, higher mortgage rates play a greater role in the market. Prices for existing homes have increased 18% by a variety of measures. According to the U.S. Census, August's median price for newly constructed homes was 20% more than August 2020.
The mortgage rates rose higher this week and will likely rise further into next year as the Federal Reserve reduces its purchases of mortgage-backed securities.
The MBA released its 2022 forecast this week. It predicted a 33% decline in mortgage origination volume and a 4% average 30-year rate. This will increase competition for lenders in a shrinking industry.
