Interest rate drop, demand for refinancing and purchasing mortgages fell last week, with total mortgage application volume down 4.8% from the previous week, according to the Mortgage Bankers Association. Record-low mortgage rates are apparently not as impressive as they used to be, likely because rates have been so low for so long. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.05% from 3.10% last week, while points, including origination fee, increased to 0.52 from 0.46 for loans with a 20% down payment. That is the lowest in the 30-year history of the MBA survey. The rate was right around 4% one year ago.
There are indications that refinance rates are not decreasing to the same extent as rates for home purchase loans, and that could explain last week’s decline in refinances. Mortgage applications to purchase a home fell 2% for the week and were 22% higher than a year ago. That is a slightly smaller annual gain than the previous week. Demand for housing has been incredibly strong in recent months, as pent-up demand from the pandemic-struck spring combined with a resulting desire for larger suburban homes. There is far less supply, however, than demand, and that is lighting a fire under home prices, which are surging by double digits in some markets. Most of the sales activity is now on the higher end of the market, where there is more supply.