The slight respite from rising mortgage rates didn't help to boost mortgage demand. According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of mortgage applications fell by 3.3% last week.
The average 30-year fixed rate mortgage interest rate dropped from 3.30% to 3.24%. Points remained unchanged at 0.34 (includes the origination fee), for loans with a 20% downpayment.
Joel Kan, an MBA economist, stated that mortgage rates fell for the first time since August. This was due to concerns about supply-chain bottlenecks and waning consumer confidence. Also, rising inflation drove Treasury yields lower.
Refinance demand continues to fall, with a 4% decline in the previous week and a 33% drop the same week a year ago. This was the slowest pace since Jan 2020. The rate of interest did not fall until the latter part of the week. This may explain why refinances didn't react. Refinance activity declined to 61.9% from 62.2% last week.
The week saw a decline in mortgage applications for home purchases of 2% and 9% respectively, compared to the same week a year ago.
Kan stated that "Purchase activity continues be held back by high prices, low for-sale inventories, but current applications still point to healthy residential demand." Kan noted that, while refinance volume is down dramatically this year, the MBA forecasts a record $1.6billion in purchase mortgage originations for this year. This will lead to continued demand for another record year in 2022.
Although mortgage rates were lower to begin this week, all bets are off as the Federal Reserve holds their scheduled policy meeting on Wednesday. The Fed will likely announce that it is cutting back on its purchases of mortgage-backed securities. This would directly impact mortgage rates.
Matthew Graham, COO at Mortgage News Daily, stated that although traders know this and are prepared for it, there may still be significant movement in the bond markets in the afternoon.
