Mortgage Rates Soar As Demand Dives
Mortgage rates are steadily climbing for a sixth consecutive week, prompting buyers to steer clear of the market.
The latest data shows an increase to 2.98% for a 30-year fixed-rate mortgage offer. According to the Mortgage Bankers Association, the demand for mortgages fell, with total application volume decreasing by 5.1% the same week.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, stated that the rates had been climbing ever since hitting the survey’s lowest point in December last year.
Last week, the rates reached their highest level since November 2020, according to MBA’s weekly survey, which the organization started more than 30 years ago.
When comparing these figures to the ones from last year, the rates are still 0.79% lower than in February 2020. Mortgage refinancing experienced a 5% drop in the past week but is 51% higher than it was the year before.
Mortgage applications to purchase a home fell 6% in the past week, following the trend over the past six weeks. Yearly, it is still 17% higher than the total mortgage applications for purchasing a home the previous year.
However, while the spike heavily influences refinancing mortgage rates, the overall surge in mortgage interest is attributed to a record low inventory of homes available. The total number of homes available for sale is lower by nearly 43% compared to the year before. The most significant shortage is in the availability of lower-end homes, impacted heavily by the seller’s overall unwillingness to go through the trouble of putting their home on the market due to the coronavirus pandemic.
As such, homes available on the market are not only scarce but also cost more. The average loan size for purchasing a home hit $412,200, another survey high. This is the result of both the inaccessibility of lower-end homes and a shift in the way people buy houses. A new survey by the National Association of Home Builders suggests that over 40% of buyers were outbid for their desired property.
Joel Kan also stated that “purchase applications cooled the first week of February, but homebuyers are still very active.” In other words, despite the rising rates, homes are now sold ten days faster on average.