Mortgage applications to buy a home rose 8% last week compared to the previous week, bolstered in part by demand for adjustable-rate mortgages, according to the seasonally adjusted Mortgage Bankers Association index. Applications, however, were 10% lower than the same week a year ago.
A big jump in mortgage rates may have spurred demand from homebuyers, perhaps because consumers were worried that rates could go even higher. Mortgage rates rose to their highest level since 2008, making their biggest one-week jump last week in 13 years.
Meanwhile, the average contractual interest rate on 30-year fixed-rate mortgages with compliant loan balances ($ 647,200 or less) rose to 5.98% from 5.65%, and the points rose to to 0.77 from 0.71 (including origination fee) for loans with 20% deposit. Now the rates are almost double what they were a year ago.
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“Purchase requests rose for the second week in a row, driven primarily by conventional applications, and the share of ARM applications again topped 10%,” wrote MBA economist Joel Kan. “The average loan size, just over $ 420,000, is well below its $ 460,000 mark earlier this year and is potentially a sign that housing price growth is moderating.”
Adjustable rate mortgages offer lower interest rates and can generally be fixed for five, seven or 10 year terms. While these loans are considered riskier because they have the potential to adjust to higher or lower rates, they are much more strictly underwritten than during the last real estate boom more than a decade ago. finally caused an epic real estate crisis.
Buyer demand may also increase as the supply of homes for sale is finally growing. Nationwide active inventory has risen 17% year-over-year, according to Realtor.com. Homes are now selling faster than a year ago.
Home loan refinancing applications fell 3% during the week and were 77% lower than the same week a year ago. The share of mortgage refinancing decreased to 29.7% of total applications from 31.7% in the previous week.