After increasing at the end of the year, mortgage interest rates decreased significantly last week. Existing homeowners looking to reduce their monthly mortgage payments fuelled this demand, but it did nothing to excite prospective purchasers.
The Mortgage Bankers Association’s seasonally adjusted index shows that as a result, the overall volume of mortgage applications increased by just 1.2% from the week before.
Mortgage Interest Rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) declined to 6.42% last week from 6.58%, with points remaining unchanged at 0.73 (including origination charge) for loans with a 20% down payment. In the previous year, this rate was 3.52%.
The decline in interest rates prompted a 5% surge in mortgage refinancing applications. However, volume was 86% lower than the same week last year.
Black Knight, a mortgage technology and analytics company report that at the current rate, just 270,000 borrowers might benefit from a refinance, despite rates being lower than their prior peak of over 7% last fall. A year ago, when the rate was half of what it is today, almost 7 million borrowers could have benefited.
Applications for mortgages to finance the purchase of property decreased by 1% for the week and were 44% lower than the same week last year. This represented the lowest reading since 2014. Not only must buyers struggle with rising borrowing rates, but also a shrinking supply.
Additionally, they are observing prices decline and may be waiting to see how low they go.
Mortgage rates have fluctuated within a limited range thus far this week.
The next release of the monthly consumer price index is scheduled for Thursday. If inflation continues to decline, mortgage rates could fall more.
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Refinance Rates
The average APR for a 30-year fixed refinance loan rose from 6.59% yesterday to 6.69% today. Last week at this time, the 30-year fixed APR was 6.79 percent. The average APR for a 15-year fixed refinancing mortgage is currently 6.05 percent. Last week at this time, the 15-year fixed-rate mortgage APR was 6.23 percent.
The average APR on a 30-year fixed-rate refinancing jumbo mortgage is 6.70 percent. The average APR on a 30-year jumbo loan was 6.80% last week. The typical APR for a 5/1 ARM refinancing is 7.35 percent. The average APR for a 5/1 ARM was 7.32 percent last week.
The majority of housing and mortgage specialists anticipate that refinance rates will settle between 5 and 6 percent by the conclusion of the year. As mortgage refinance interest rates have risen in 2022, it will be less attractive for mortgage borrowers to refinance their loan if their new rate is close to the one they are now paying, especially when closing expenses are factored in.
There is still time for homeowners to reduce their monthly mortgage payments through refinancing, while mortgage rates remain quite low.
Now is a good moment for homeowners who want to save money by locking in a lower interest rate, shorten their mortgage term, and access some of their home equity without selling their property to calculate whether refinancing makes financial sense.
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