Mortgage rates are edging noticeably higher this week, and would-be home buyers and refinancing homeowners may have missed out on a chance to lock in a lower rate.
Mortgage application volume for refinancings and home purchases dropped 2.7 percent last week on a seasonally adjusted week-to-week basis, the Mortgage Bankers Association reported Wednesday. Mortgage application volume is 4.5 percent lower than the same week a year ago.
Applications for refinancings posted the biggest drop last week. Volume plunged 4 percent to the lowest level since August 2008. Refinancing applications tend to be more rate sensitive than applications for home purchases. Refinancing applications are nearly 17 percent lower than a year ago when interest rates were much lower.
Mortgage applications to buy a home dropped 2 percent last week, but volume remains 4 percent higher than a year ago.
The 30-year fixed-rate mortgage dropped to 4.77 percent last week, the MBA reports. But on Tuesday, interest rates jumped to a seven-year high, following a major sell-off in the bond market, CNBC reports. The average 30-year fixed-rate averaged 4.875 percent for the highest creditworthy borrowers and 5 percent for the average borrower, according to Mortgage News Daily.
More buyers are turning to adjustable-rate mortgages, which offer lower introductory rates for a set period before rising. But ARMs are on the rise too. “Jumbo and 5/1 ARM rates increased, with the 5/1 ARM rate increasing to its highest in our survey at 4.09 percent,” says Joel Kan, an MBA economist.
“Homebuyer demand has remained positive and shaken off the higher rate environment so far this year,” says Sam Khater, Freddie Mac’s chief economist. “However, after years of very low mortgage rates, the symbolic risk of a 5 percent mortgage, on top of higher gas prices, may cause a slowdown in homebuyer demand, particularly in western states and exurbs that are affected more by gas prices than the typical consumer.”
Source: “Weekly Mortgage Applications Fall 2.7% Even Before Rates Spike,” CNBC (May 16, 2018) and “Mortgage Rates Are Surging to the Highest Level in 7 Years,” CNBC (May 15, 2018)
