Overall mortgage activity dipped 1.1% from the previous week, the MBA reported on Wednesday
As mortgage rates have hit their highest levels in months, the brakes have been tapped on mortgage borrowing.
That’s even though interest rates are still in historically low territory, and are expected to go higher.
The number of applications to purchase homes and refinance existing mortgages is falling, according to the latest survey by the US’ largest mortgage trade association.
While the decline in purchase loans can be explained by high home prices and a low supply of properties for sale, the drop in refinance applications is more puzzling. Millions of homeowners can still save thousands of dollars a year by refinancing, even with the increases in mortgage rates.
For the week ending Sept. 24, overall mortgage activity dipped 1.1% from the previous week, the Mortgage Bankers Association (MBA) reported on Wednesday. Refinancing activity was down 1% from the previous week and was essentially flat from a year earlier.
Demand has dropped as economic optimism fuels stronger mortgage rates. The MBA’s survey found the average rate on the nation’s most popular loan, the 30-year fixed-rate mortgage, has reached 3.10%, the highest level since early July.
According to a separate survey released Thursday by mortgage giant Freddie Mac, the average rate on the 30-year fixed-rate mortgage reached 3.01% this week. The last time Freddie Mac put the typical rate above 3% was late June.
Still, mortgage rates remain far lower than they were before the pandemic. And while more than three-quarters of homeowners did not refinance to take advantage of cheap rates during the 12 months that ended in April, nearly half who did are now saving $300 or more each month, according to a Zillow study.
With the U.S. economy on an upswing, today’s low mortgage rates are likely to rise faster than many had been expecting.
A recent Freddie Mac forecast looked for the 30-year rate to rise to nearly 3.4% by year-end, then hit an average 3.8% by the end of next year.
We expect mortgage rates to continue to rise modestly, Sam Khater, Freddie Mac’s chief economist, said in a statement Thursday.