An open house flag is displayed in front of a single family home on September 22, 2022 in Los Angeles, California.
Allison Dinner | Getty Images
Stress in the banking system proved to be a boon for the US mortgage market. As investors hid in the relative safety of the bond market, yields fell even further last week. Mortgage rates followed.
Accordingly, demand for mortgages rose 2.9% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. However, the gains could be short-lived as interest rates are now rising again.
Last week, the average contract rate for 30-year fixed-rate mortgages with matching loan balances ($726,200 or less) fell from 6.48% to 6.45%, with points falling from 0.66 (including the setup fee) to 0.62 for loans with a 20% deposit. In the same week a year ago, the rate was 4.8%.
Applications to refinance a home loan rose 5% on the week but were still 61% lower year-on-year. The vast majority of homeowners today have mortgages with interest rates well below today’s rate, leaving them little incentive to refinance. Those who want to raise equity mostly opt for second loans instead of forgoing the interest of a cash-out refinancing.
Mortgage applications to buy a home rose 2% this week but were 35% lower than the same week a year ago. Buyers are returning to the market for the traditionally busy spring season but are finding very little supply for sale.
“Home price growth has slowed significantly in many parts of the country, which has helped boost buyers’ purchasing power,” said Joel Kan, an MBA economist, in the release. “While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, homebuyers reacted, leading to a fourth straight spike in home buyer requests.”
However, mortgage rates rose by more than 20 basis points earlier this week, according to a separate survey by Mortgage News Daily. With no more bank failures in the news this week and no major economic data likely to affect investors, interest rates could return to the higher levels they were before the banking problems hit.