A sign advertising home loan rates for purchase or refinancing at Bank of America in New York.
Scott Millian | CNBC
The short boom in mortgage refinancing demand quickly faded, after interest rates resumed their rise along with the stock market. The initial fear of the Covid omicron variant caused prices to drop for about four days, sending borrowers rushing to their lenders, but then prices rose sharply again, and then fell slightly last week.
As a result of the sharp volatility, the average contract interest rate on 30-year fixed rate mortgages with matching loan balances ($548,250 or less) over the week remained unchanged at 3.30%, with points unchanged at 0.39 (incl. Creation fee) for loans with a 20% down payment.
Home loan refinancing requests fell 6% over the week and were 41% lower than the same week a year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. Last year’s rates at this time were about 45 basis points lower.
“Few homeowners have a strong incentive to refinance at current rates,” said Joel Kahn, MBA economist.
About a quarter of all borrowers have rates below 3% with more between 3% and 3.5%, according to Black Knight, a mortgage data analytics company. Generally, borrowers will need to deduct about 50 basis points from their current rate to make a cost-equal refinancing.
Applications for a mortgage to buy a home increased only 1% from week to week, and were 9% lower than in the same week one year ago. While demand for housing is strong, supply is weak and prices continue to rise at a rapid pace. The path of higher mortgage rates into the future does not help homebuyers, especially beginners who have very little room in their budgets.
Mortgage rates remained flat at launch this week, but all bets were off Wednesday afternoon, when the Federal Reserve made its latest monetary policy announcement. While mortgage rates do not follow the federal funds rate, they are strongly influenced by the Federal Reserve’s purchases of mortgage-backed securities. This support since the beginning of the pandemic has caused mortgage rates to rise to more than a dozen record lows last year. This is about to finish.
“The Fed is likely to announce a faster cooling of its bond-buying programs. The target end date for bond-buying will imply the timeframe the Fed is considering raising interest rates for the first time since cutting them to zero at the start of the pandemic,” Matthew wrote Graham, COO of Mortgage News Daily.