After briefly falling for most of May, mortgage rates began to rise again last week, which directly affected mortgage demand, which had been strengthening for several weeks.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.05 percent from 7.01 percent, with points increasing to 0.63 from 0.60 (including the origination fee) for loans with a 20 percent down payment.
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It was the first increase in four weeks and while it may not seem like much, it is an average, with rates having fallen back to 6% before surging last week.
As a result, total mortgage applications fell 5.7% last week from the previous week, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted index.
“Both home purchase and refinance applications declined, pushing overall activity to its lowest level since early March,” MBA economist Joel Kan wrote in a release. “Borrowers remain sensitive to even modest increases in interest rates, which is weighing on the refinance market and keeping home purchase applications below last year’s levels.”
Refinancing demand, which had been in the process of a slight recovery, plunged 14% last week but was still 12% higher than a year ago.
Mortgage applications to purchase a home fell 1% last week and are 10% below the same period last year.
“The number of existing homes for sale remains limited, and many buyers are struggling to find a home in their price range that meets their needs,” Kan added.
Mortgage rates started the week on a sharp rise, rising 12 basis points on Tuesday alone, according to a separate survey from Daily Mortgage News, following comments from Minneapolis Federal Reserve Bank President Neel Kashkari on the direction of rates.
He told CNBC on Tuesday that he needs to see “more months of positive inflation data, I think, to give me the confidence that a rate cut is appropriate.”
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