Residential homes in Discovery Bay, California, U.S., Thursday, November 7, 2024. U.S. mortgage rates rose to the highest level since July.
David Paul Morris | Bloomberg | Getty Images
Mortgage rates last week rose for the fourth week in a row. This caused the already very weak demand for mortgage loans to decline even further. Total mortgage applications fell 3.7% from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. An additional correction was made on the occasion of the New Year holidays.
The average contractual interest rate for 30-year fixed-rate mortgages with a conforming loan balance ($766,550 or less) increased to 6.99% from 6.97%, with points dropping to 0.68 from 0.72 (including commission for granting a loan) in the case of loans with a 20% discount.
Home loan refinance applications were up 2% from the previous week, but were 6% lower than the same week a year ago. Interest rates are now 18 basis points higher than they were a year ago. In terms of weekly yield, refinance volume is currently so low that interest rates are higher than normal.
The number of mortgage loan applications for home purchases fell by 7% during the week and was 15% lower than in the same week a year ago. There is a much greater supply of homes for sale today than in January last year, but higher rates and higher home prices are clearly keeping buyers on the sidelines.
“Both conventional and government loan applications fell to their slowest weekly pace since February 2024.” – said Joel Kan, vice president and deputy chief economist at MBA. “Refinance application growth increased despite higher interest rates, but the increase compared to recent lows and was entirely driven by an increase in VA refinances, which continue to show weekly fluctuations.”
Mortgage rates rose earlier this week, according to a separate study by Mortgage News Daily, which on Tuesday set a steady 30-year average of 7.14%. The decisive factor was economic data.
“The inflation component of ISM Services was one of the biggest culprits, but more job openings did not help. The increase in profitability was immediate but quite limited,” noted Matthew Graham, chief operating officer at MND.
More macroeconomic data will emerge on Wednesday with the release of Federal Reserve meeting minutes and on Friday with the all-important monthly jobs report. They will maintain an upward trend or perhaps change the trend for the new year.