Key points

  • Home owners in the US are continuing to take mortgages despite high interest rates.
  • Applications to refinance homes has now jumped 10% in the past week which is 4% higher than the same period YoY.
  • Applications for new homes mortgages fell 5% for the week and also 23% lower YoY.

US home owners have increased their demand for home refinancing mortages over the past week despite interest rates being as high as 7% at the moment. However, the demand for mortgages for new homes has fallen significantly within the same period.

House owners continue to take mortgages in the US despite high interest rates

2023’s rising inflation rates saw the US Federal Reserve raise interest rates several times. Till now, it is yet to cut the rates back as it fears that inflation is still not stable. As a result, the cost of loans and mortgages has been going up within the past 18 months as a result of the hikes in interest rates.

As such, it would be expected that fewer people would be seeking to finance their homes or other assets. Refinance demand usually drops in the event of rates hikes but the rates had fallen back slightly over the past weeks. Also, there is hope in the market that the Federal Reserve will not be increasing rates as it is anticipating for further cuts as the year goes by.

According to data from Mortgage Bankers Association, total mortgage application volume increased by 0.1% over the past week. Applications for home refinancing loans jumped 10% for the week, which is 4% higher YoY. In the same time, the average contract interest rate for a 30-year fixed-rate mortgage with matching loan balances ($766,550 or less) rose to 7.01% from 6.91%, with points remaining at 0.59 (including the origination fee) for the loans that have a 20% down payment. 

“Mortgage rates moved higher last week as several Federal Reserve officials reiterated a patient posture on rate cuts. Inflation remains stubbornly above the Fed’s target, and the broader economy continues to show resiliency. Unexpectedly strong employment data released last week further added to the upward pressure on rates,” said Joel Kan, MBA’s vice president and deputy chief economist.

Now, investors are waiting for key inflation dta that releases later today, and depending on the report, mortgage rates could have sharp movements to either directions. 

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