Mortgage Rates Spike to Three-Week High
Mortgage rates experienced a volatile week, climbing sharply after a brief decline to a three-year low just two weeks prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 6.46% from 6.34%, marking the highest level in three weeks. Points, including origination fees for loans with a 20% down payment, increased to 0.61 from 0.57.Mortgage Applications Drop 12.7% Amid Rate Increase
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume fell 12.7% last week compared to the previous week. The decline was largely driven by a significant pullback in refinancing activity.Refinance Applications Plummet 21%
Applications for refinancing a home loan decreased by 21% week-over-week, although they remain 16% higher than the same week last year despite mortgage rates being 32 basis points higher year-over-year. The refinance share of total mortgage applications contracted from 60% to 55%. Joel Kan, MBA’s vice president and deputy chief economist, attributed the rate increase to rising Treasury yields driven by stronger-than-expected economic data. He noted that the recent surge in refinancing activity has been reversed, indicating refinance opportunities this year may be limited.Decline Across All Refinance Loan Types
- Conventional refinance applications fell 22%.
- VA refinance applications dropped 27%.
- Average refinance loan size shrank to $380,100 from $461,300 two weeks earlier, reflecting diminished incentives for borrowers with larger loans.
Home Purchase Applications Slightly Down
Mortgage applications for home purchases declined by 1% last week but remain 16% above levels from the previous year, following three consecutive weeks of growth. Kan highlighted that purchase activity is influenced by broader economic conditions, labor market strength, and housing inventory availability.Housing Inventory Sees First Decline Since Year Start
Data from the National Association of Realtors reveals housing inventory fell in August for the first time this year. Although homes are remaining on the market longer, boosting supply compared to last year, an increasing number of sellers are delisting properties or postponing sales in anticipation of better market conditions. Mortgage rates remained stable at the start of the current week. Expectations that rates might shift following the monthly employment report were disrupted by a government shutdown, leaving further rate movements uncertain.FinOracleAI — Market View
The recent volatility in mortgage rates has led to a pronounced retreat in refinancing activity, underscoring the sensitivity of borrowers to even modest rate increases. While purchase applications remain robust compared to last year, the slight weekly decline and tightening housing inventory suggest potential headwinds ahead.- Opportunities: Stabilizing mortgage rates may encourage cautious borrowers to re-enter the refinance market.
- Risks: Continued rate increases could suppress both refinance and purchase demand, slowing housing market momentum.
- Inventory dynamics: Reduced housing supply may further constrain purchase activity, potentially driving price volatility.
- Economic data impact: Upcoming employment and economic reports will be pivotal in shaping mortgage rate trends and borrower behavior.
Impact: The mortgage market faces near-term challenges as rising interest rates curb refinancing, while purchase demand remains vulnerable to economic and inventory pressures.
