Realtors leave home for sale during a realtors open house in San Francisco, California.
Justin Sullivan | Getty Images
A sudden reversal of record low interest rates last week led to a pullback in the demand for mortgage refinancing.
That dropped the total volume of mortgage applications 3.3% from the previous week, according to the seasonally adjusted index of the Mortgage Bankers Association.
The average interest rate for contract for 30-year fixed-rate mortgage with matching loan balance ($ 510,400 or less) increased rather abruptly to 3.13% from 3.06%, respectively. Points including the reimbursement fee increased to 0.36 from 0.33 for loans with a 20% down payment.
“Positive economic data reported last week on retail sales, such as a major U.S. treasury auction, pushed mortgage rates to their highest level in two weeks,” said Joel Kan, an MBA economist.
The rise in rates caused the demand for refinancing for the week to fall 5%, but was 38% higher than a year ago. That annual profit continues to shrink. Last month, demand for refinancing was more than 100% higher than a year ago.
The difference now is that the interest rates reduce the gap to where they were a year ago. While they were a full percentage point lower each year last month, they are now 77 basis points lower, allowing fewer lenders to benefit from refinancing.
Mortgage applications to buy a home increased just 1% for the week, but were a notable 27% higher compared to a year ago. This marks three straight months of annual profits for purchasing applications.
The demand for housing swells through, only held back by the severe shortage of homes for sale. Homebuilders are increasing production, and mortgage applications for newly built homes are flying even higher.
“The housing market remains a bright spot in the current economic recovery, and these results, combined with July data on housing starts and homebuilder optimism, suggest that housing supply could increase to better meet the strong demand for buying a home. house, “said Kan.
Mortgage rates pulled back a bit to start this week. The increase last week was due in part to an increase in loan fees imposed by Fannie Mae and Freddie Mac. If lenders settle into that new normal, they fall back in line with treasury returns.
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