Mortgage Applications Down 11% – Beginning of a Trend?

Mortgage rates have fallen to historic lows during the coronavirus pandemic, leading to increased demand for home loans. But things may be starting to change.

Total mortgage application volume fell 11.4% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Specifically, home purchase mortgage applications fell 12% for the week, while mortgage refinancing applications fell 11%.

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The start of a trend?

Bad weather in the southern United States is believed to have contributed to a drop in mortgage applications. Many areas of Texas, for example, have lost power for days in the wake of storms, and mortgage and refinancing applications fell 40% last week in Texas alone.

But we should not be quick to attribute a decline in mortgage activity to bad weather. Rising interest rates also undoubtedly play a role.

The average interest rate for a 30-year fixed-rate mortgage with a compliant loan balance ($ 548,250 or less for most of the country) rose to 3.08% from 2.98% last week . And this week, mortgage rates are on the rise again for both new home purchases and refinancings. Add to that the fact that home prices have gone up across the country, making it a less affordable combination for first-time buyers. Refinancers, on the other hand, can now choose to bide their time and wait for rates to drop before swapping their existing home loans for new ones.

Of course, the further decline in mortgage activity will largely depend on the development of rates over the next few weeks. While the Federal Reserve is expected to keep its short-term rate near 0% for the foreseeable future, long-term bond yields have started to rise. And mortgage rates are generally more influenced by the 10-year Treasury than by Federal Reserve rates.

That said, even if mortgage rates continue to climb, they are likely to remain competitive on a historic basis at least for the remainder of 2021. And as more properties hit the market in the spring, which is usually when this is due. Particular boom starts off, an increase in inventory could help bring down home prices. That alone could lead to a further increase in mortgage activity.

All in all, the fact that mortgage demand fell last week is not surprising, and we could see several weeks of declines before a surge in demand this spring. Even if rates don’t drop to their lowest point, homebuyers and refinancers will likely recognize that in the grand scheme of mortgage rate developments, there is still a lot of bargain to be done.

Plus, as the economy slowly but steadily improves, more and more people may find themselves in a position to buy a home – or qualify for a mortgage to do so. Right now, fears of job loss may prevent some potential buyers from going out and looking for housing, but if the economy experiences a noticeable recovery later this year, it could lead to more people moving out and out. apply for a mortgage to buy a home. clean.

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