A sign advertising home loan or refinancing rates at Bank of America in New York.
Scott Mlyn | CNBC
Mortgage refinancing demand spiked rapidly after interest rates continued to climb along with the stock market. The initial fear from Covid The omicron variation caused interest rates to drop for about four days, sending borrowers flocking to their lenders, but then rates spiked again and then fell a bit last week.
As a result of the sharp swings, during the week, the average contract rate for 30-year fixed-rate mortgages with matching loan balances ($548,250 or less) was flat at 3, 30%, with a flat score of 0.39 (including principal) on 20% prepaid loans.
Applications to refinance a home loan fell 6% for the week and 41% lower than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. Last year at this point the rate was about 45 basis points lower.
“Few homeowners have a strong incentive to refinance at current interest rates,” said Joel Kan, an MBA economist.
According to Black Knight, a mortgage data and analytics company, about a quarter of borrowers have interest rates less than 3% with more than 3% to 3.5%. All in all, borrowers will need to drop about 50 basis points from their current rate to generate a cost-worthy refinance.
Mortgage applications to buy a home were up just 1% from the previous week and 9% lower than the same period a year ago. While housing demand is strong, supply is weak and prices are continuing to rise at a rapid rate. The trajectory of higher mortgage rates ahead isn’t helping homebuyers, especially first-timers with little room in their budget.
Mortgage rates held steady starting this week, but all bets were off Wednesday afternoon, when the Federal Reserve made its latest announcement on monetary policy. Although mortgage rates do not follow loan rates, they are heavily influenced by the Fed’s purchase of mortgage bonds. That support since the start of the pandemic sent mortgage rates to more than a dozen record lows last year. That is about to end.
“The Fed will most likely announce a faster shortening of its bond-buying program. The target end date for bond purchases will implicitly hint at the timeframe in which the Fed thinks about raising rates for the first time since since cutting them to zero, writes Matthew Graham, chief executive officer of Mortgage News Daily.
