A house is seen under construction at a residential development in Lemont, Illinois, on June 21, 2023.
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Mortgage rates moved higher again last week. But the increase hasn’t cut mortgage demand as buyers seek new construction.
Total mortgage applications rose 3% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Additional adjustments have been made for the Juneteenth holiday.
Mortgage applications for home purchases rose 3% this week but were down 21% year-over-year. Those applications have risen for three straight weeks, to the highest level since early May, even as mortgage rates remain high.
“New home sales have been driving buying activity in recent months as buyers look outside the existing home market for options.” “Existing home sales continue to be dampened by a lack of for-sale inventory, as many would-be sellers remain on lower-rate mortgages.”
New home sales jumped 12% in May from April and 20% higher than in May 2022, According to reports Tuesday from the U.S. Census. Builders drive demand in part by offering incentives, such as mortgage repayment rates.
The average contract rate for 30-year fixed-rate mortgages with qualifying loan balances ($726,200 or less) rose last week to 6.75 percent from 6.73 percent, with payments remaining at 0.64 points (including origination fees) for loans with 20 percent down. The average rate on 30-year fixed-rate mortgages with large loan balances (more than $726,200) rose sharply from 6.80% to 6.91%.
“The spread between the jumbo rate and the qualifying rate widened to 16 basis points, marking the third week in a row that the jumbo rate was above the qualifying rate,” Kan said. In July, the special interest rate was on average about 30 basis points lower than the eligible interest rate.”
Widening spreads and huge rate hikes stemmed from recent regional bank failures. Lenders hold huge loans on their balance sheets because Fannie and Freddie don’t buy loans of this size. Bank credit, especially from community banks, has tightened significantly, causing interest rates to rise.
Applications to refinance home loans rose 3% this week, but were down 32% from the same week a year ago. Today, the vast majority of borrowers have mortgage rates below 4%.
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