Mortgage rates have seen a significant increase compared to the beginning of the year. However, there was a slight pullback in the rates last week, following several weeks of consecutive rises. This shift in rates has led to a renewed interest in refinancing among homeowners.
Factors Influencing Rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 7.18% from 7.29% last week. This drop was attributed to the news of a slowing job market and wage growth, along with the Federal Reserve’s plans to ease quantitative tightening and delay any further rate hikes.
Federal Housing Administration loans saw their rates fall below 7% for the first time in three weeks. This is particularly beneficial for first-time homebuyers, who rely on FHA loans to finance their purchases. The increased activity in this segment of the market is a positive sign for the overall housing market.
The dip in mortgage rates resulted in a 5% increase in refinance applications for the week. However, despite this uptick, refinance activity still remains 6% lower compared to the same time last year. With rates 70 basis points higher than a year ago, the pool of borrowers eligible for refinancing is limited.
Home Purchases
Applications for mortgage loans to purchase homes also rose by 2% for the week. However, the numbers are still down by 17% year-over-year. Affordability remains a major concern for potential buyers, as rising home prices and tight supply continue to put pressure on the market.
Looking ahead, mortgage rates have further decreased at the start of this week. The upcoming release of the monthly consumer price index is expected to have a significant impact on rates. Depending on the data’s implications for inflation, rates could see a sharp movement in either direction.
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