American home buyers are rushing to get their deals done. Mortgage rates are going up and many want to close their purchases before higher rates kick in.
Mortgage Rates Are Going Higher As Home Buyers Rush To Complete Deals
As more home buyers rush to complete their deals, mortgage rates continue to climb higher.
The average 30-year fixed-rate mortgage interest rate went up from 3.52% to 3.64%. This covers loans with balances below $647,201. Meanwhile, points remain unchanged at 0.45 for loans with a 20% down payment.
This includes the origination fee. Compared to the same period last year, this new rate is 72 basis points higher. This also jumped more than 30 basis points within the last two weeks.
The increasing rates led to a disruption in mortgage demand. While refinancing continues to fall, home buyers appear to rush into closing a purchase.
Consequently, the total mortgage application volume rose 2.3% versus last week. This is according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications For Refinancing Dried Up
Conversely, refinancing applications fell by 3% for the week and were almost 50% lower compared to last year. This means that the refinance share of mortgage activity decreased from 64.1% last week to 60.3%.
Joel Kan, MBA’s AVP of economic and industry forecasting, said the higher rates aren’t suitable for refinancing. “Mortgage rates hit their highest levels since March 2020,” he said. “It led to the slowest pace of refinance activity in over two years. FHA and VA refinance declines drove most of the refinance slowdown,” Kan added.
Meanwhile, mortgage applications from home buyers increased by 8% for the week. However, these numbers are still 13% lower compared to the frenzied activity last year.
Analysts also noted that much of the buying activity centered on higher-priced houses. This is likely due to the fact that most of the cheaper houses are already off the market.
In fact, the average loan size for a purchase application during the period set a record at $418,500. Kan surmised that the slower growth in government purchase activity helped with the larger loan balance.
This suggests that “prospective first-time buyers are struggling to find homes to buy in their price range,” Kan said.
Housing Continues To Stay In Demand
Demand for housing continues to be strong, mainly due to the fact that supply did not increase during December. Normally, the last month of the year brings a surplus number of available units.
Analysts think that some home buyers are jumping the gun before rates increase further. Instead of waiting for the spring market, many home buyers decided to do so now.
Paul Legere, a buyer’s agent with The Joel Nelson Group, described the buying frenzy as unprecedented. “Some lenders I work with say they have had more first-time homebuyer applications in the last couple of weeks than they’ve seen in 20 years,” he said.
Watch the Yahoo Finance video feature on Mortgage rates: What a Fed rate hike would mean for homeowners:
Did you purchase a house during the pandemic? Did you manage to lock down low rates? Also, what do you think of the housing market right now compared to last year?
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