Mortgage interest rates increased for the third consecutive week, reaching the highest level since August. This caused a significant decrease in demand from both current homeowners and potential homebuyers. Total mortgage application volume dropped by 17% compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages also rose to 6.52% from 6.36%, with points increasing to 0.65 from 0.62 for loans with a 20% down payment.
Refinance demand, which is most affected by weekly rate changes, saw a substantial drop of 26% week over week. Despite this decrease, refinance applications were still 111% higher than the same week a year ago, when rates were significantly higher. The refinance share of applications fell below 50% for the first time in over a month. Applications for mortgages to purchase a home also fell by 7% for the week, but were 7% higher than the same week last year.
Despite the increase in rates, demand for FHA purchase applications remained steady, particularly among first-time homebuyers. This may be due to improving housing inventory conditions, giving prospective buyers more options. The recent rise in mortgage rates has impacted the resurgence in refinancing, as some homebuyers may be more concerned about the economy’s future direction in the coming months. Some individuals are holding off on major purchases, including buying a home, until after the November election.
Rates have remained relatively stable at the beginning of the current week, especially after the federal holiday on Monday. While the increase in mortgage rates has slowed down the refinancing trend, potential homebuyers may be more focused on economic conditions ahead of the election. The uncertainty surrounding the election may be causing some buyers to postpone major purchases such as buying a home. The increase in supply in the housing market is creating opportunities for buyers, particularly first-time homebuyers.
Overall, the recent increase in mortgage rates has led to a decline in demand from both current homeowners and potential homebuyers. Refinance applications experienced a significant drop, while purchase applications also saw a decrease. First-time homebuyers seem to be undeterred by rising rates, potentially due to improving housing inventory conditions. The upcoming election and economic uncertainty may be influencing buyers’ decisions to delay major purchases. Despite the challenges posed by higher rates, opportunities are emerging in the housing market for buyers to explore.
