Weekly mortgage demand stays stalled, as high rates deter buyers

Mortgage rates didn’t move much last week, and for the second week in a row, demand for mortgages didn’t change either. Would-be buyers are handcuffed by sky-high costs and low supply, and current homeowners have little or no incentive to refinance at today’s high rates.

Total mortgage application volume last week remained essentially flat, down 0.6% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell from 6.93% to 6.91%, with points falling from 0, 60 to 0.59 (including origination fees) for loans with 20% down. payment.

Home loan refinancing applications fell 2% for the week and were 5% lower than the same week a year ago. Rates have been hovering around 7% for several months, and nearly 90% of current borrowers have mortgages with rates below 6%.

Mortgage applications to purchase a home decreased 0.1% from the previous week and were 13% lower than the week a year ago. Buying demand is now about half of what it was in March 2020, before the Federal Reserve cut rates to zero, triggering a massive boom in home buying that wiped out already low supply . With rates now twice as high as they were then, sellers are stuck in place and buyers can afford much less.

“High mortgage rates continued to weigh on home purchasing. Purchase applications remained largely unchanged, although FHA purchases increased slightly during the week,” noted Joel Kan, MBA economist.

Mortgage rates rebounded higher this week after new economic data on the manufacturing sector came in higher than expected and pointed to higher prices.

“Pricing is critical right now because inflation is keeping rates high,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “If inflation refuses to return to the downward trajectory that was in place until the end of 2023, rates will have no compelling reason to rise again.”

Wednesday brings more data on growth in the services sector, and Friday the all-important monthly jobs report is released. Both could create rate momentum in one direction or the other.