Mortgage News March 16, 2023
The recent surge in mortgage rates has had a major impact on the housing market, as many buyers are reconsidering purchasing homes. Mortgage applications for home purchases declined by 6% for the week ending February 24 from the previous week, hitting a 28-year low.
The drop in demand was even steeper compared to the same week a year ago, with a 44% decrease. Inflation, employment, and economic activity data indicate that inflation may not be cooling as quickly as anticipated, which puts upward pressure on rates. The average contract interest rate for 30-year fixed-rate mortgages increased to 6.71%, up from the previous week’s 6.62%, while the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances remained at 6.44%.
Some potential buyers may hold off on purchasing until rates cool off again. Mortgage loan originators had hoped for a strong spring housing market, as rates were declining in January. However, hopes have dwindled, and demand to refinance has also declined for the week, dropping by 6% week over week, and refi demand was 74% lower compared to the same week last year.
The Mortgage Bankers Association (MBA) anticipates a decrease in the interest rate for 30-year fixed-rate mortgages, with a projected drop to 6.1% in Q2, followed by further declines to 5.7% in Q3 and 5.3% in Q4. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% of the total volume, and the FHA share of total applications remained unchanged at 12.1%. Meanwhile, the refinance share of mortgage activity decreased to 31.8% of total applications from 32.5% in the previous week, and the USDA share of total volume declined to 0.5% from 0.6% during the same period.
While the current state of the housing market is less than ideal, there are still reasons for optimism. The MBA anticipates that rates will continue to drop throughout the year, which may lead to more activity in the latter half of the year. In the meantime, buyers and lenders will need to be patient and wait for the market to stabilize.
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