Mortgage rates moved higher again last week, pushing buyers back to the sidelines just as the spring housing market is supposed to be heating up.
Mortgage applications to purchase a home dropped 6% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 44% lower than the same week one year ago, and is now sitting at a 28-year low.
This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.71% from 6.62%, with points increasing to 0.77 from 0.75 (including the origination fee) for loans with a 20% down payment. That is the highest rate since November of last year.
Mortgage rates have moved 50 basis points higher in just the past month. Last February, rates were in the 4% range.
“Data on inflation, employment, and economic activity have signaled that inflation may not be cooling as quickly as anticipated, which continues to put upward pressure on rates,” said Joel Kan, an MBA economist.
Applications to refinance a home loan dropped 6% for the week and were 74% lower year over year.
“Refinance applications account for less than a third of all applications and remained more than 70% behind last year’s pace, as a majority of homeowners are already locked into lower rates,” added Kan.
Mortgage rates haven’t done much to start this week, but the trajectory now appears to be higher, after a brief respite in January. Lower rates to start the year caused a brief surge in homebuying, but mortgage demand from homebuyers this month would seem to indicate a very slow spring is ahead.