Mortgage demand has struggled for the better part of the last four months, ultimately falling to its lowest level since 1997 just a few days ago. Of course, this decline is caused by three major issues: rising interest rates, higher home prices, and rising inflation pressures.
Specifically, homebuyer demand for new mortgages slipped by 4% last week, bringing the total decline, for the year, down by 38%. According to the Mortgage Bankers Association, refinance applications are also down: 7% on the week and more than 85% on the year. Of course, we still have a good two months left in the year, as well.
The bigger news is that most borrowers probably do not really benefit, right now, from a mortgage refinancing option. Granted, much of this is likely due to the fact that those who may have wanted to refinance their home within the past few years probably already did it early in the pandemic when interest rates were extremely low.
All that said, the current average contract interest rate on a 30-year fixed rate mortgage (with conforming loan balances, meaning at or below $627,000) crept up from 6.81% to 6.94%, as points fell from 0.97 to 0.95 (which includes origination fee) on loans requiring a down payment of 20%.
To put this in perspective, this is the highest such rate on the MBA index since 2002. Shockingly, though, the lowest rate in recent history was only this past December. On the 14th, a 30-year fixed mortgage carried a far more favorable rate of 2.66%.
But this does not mean that people are refusing to buy a home, these days. Many potential homebuyers are opting for adjustable-rate loans instead since they offer lower interest rates. Indeed, ARM applications rose nearly 13% [of all mortgage applications] last week, which is the highest that metric has been since March of 2008.
For those who are buying homes, average loan amounts are, not surprisingly, on an upward trend. They are up from $399,100 last week to $402,600, this week. Similarly the average for all loans went up from $366,000 to $360,0400.
