Wild swings in mortgage rates last week caused a rare surge in refinancing

Wild swings in mortgage rates last week caused a rare surge in refinancing

After falling in late July, mortgage rates rose again on average last week, but daily movements have been volatile. Mortgage demand was mixed, with gains in refinancing but declines in homebuyer applications, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) increased from 5.43% to 5.47%, with points going from 0.65 (including the setup fee) to 0.80 for loans with a Discount of 20% increased payment. While the weekly average didn’t change much, the daily moves were more dramatic.

Another reading of Mortgage News Daily showed that the average rate on the 30-year peg jumped 45 basis points early last week, then fell 41 basis points on Thursday, and then jumped back up 36 basis points. Mortgage rates don’t often move in such large increments.

An “Open House” sign at the Saratoga Homes Glendale Lakes community development in Arcola, Texas on Tuesday, July 12, 2022.

Mark Felix | Bloomberg | Getty Images

This volatility was likely behind the refinancing gain, which has steadily declined since the beginning of this year. Those applications rose 4% on the week. Some may have been quick to take advantage of the fall in prices, or were still hoping to get the lower bids from the past few weeks. However, refinancing is still 82% lower than a year ago when interest rates were around 3%.

Mortgage applications to buy a home, which are less sensitive to weekly interest rate movements, fell 1% on the week and 19% year-on-year.

“The procurement market continues to experience a slowdown despite the strong labor market,” said Joel Kan, MBA’s associate vice president of economic and industry forecasts. “Activity has now fallen for five of the last six weeks as shoppers remain on the sidelines on still-challenging affordability conditions and doubts about the strength of the economy.”

Mortgage rates fell slightly earlier this week and were far less volatile than last week. That could change on Wednesday with the release of the latest consumer price index, which measures inflation in the economy. The bond market is perhaps watching this most closely of all economic indicators.