Short-term drop in mortgage rates sparks small refinancing boom
A single-family home for sale in Encinitas, California.
Mike Blake | Reuters
After steadily rising for months, mortgage rates turned around last week, and borrowers jumped to take advantage. The crisis in Ukraine has rattled financial markets and sparked a race in the relatively safer bond market. Yields fall and mortgage rates go up.
The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) dropped from 4.15% to 4.09%, points unchanged at 0.44 (including principal) for loans with a 20% down payment, according to the Mortgage Bankers Association. This is 83 basis points lower than a year ago.
As a result, refinancing demand grew 9% last week from the previous week, but applications were still half as much as a year ago, when interest rates were lower.
“Mortgage rates fell for the first time in 12 weeks, as the war in Ukraine spurred investors to seek quality, which pushed up Treasury yields,” said Joel Kan, an MBA economist. US silver lower. “Looking ahead, the possibility of higher inflation amid disruptions to oil and other commodity flows is likely to lead to a period of exchange rate volatility as these effects backfire. “
Mortgage applications to buy a home rose 9% from the previous week but were 7% lower than the same period a year ago. Homebuyers are less sensitive to weekly rate fluctuations and the spike in demand could be attributed to increased supply hitting the market for spring. Of course, even a slightly lower mortgage rate doesn’t matter, especially given how high home prices are now.
“Average loan size remains at a record high, with higher balance applications continuing to drive growth,” added Kan.
Mortgage rates rebounded sharply earlier this week, rising more than 25 basis points in just two days, according to Mortgage News Daily. Investors are leaving bonds, sending yields up, though crisis in Ukrainethis caused the rate to fall in the first place.
“While the Ukraine situation has indeed boosted demand for bonds, the associated inflationary effects are simultaneously pushing demand away,” wrote Matthew Graham, chief executive officer of Mortgage News Daily. “The net effect is a move back to the highest mortgage rates since early 2019.”