After cratering last fall as interest rates surged, home refinance loans staged a modest, albeit brief comeback to kick off 2023.
As rates settled back to 6.2 percent in January, the decline sparked a 15 percent increase in mortgage finance applications in January, according to the Mortgage Bankers Association.
Applications for purchase mortgages also rose by 3 percent during the same period.
It was enough to prompt a relatively optimistic statement from the head of the MBA about brightening prospects for home buyers looking ahead to the spring market.
“Mortgage rates declined for the third straight week, which is good news for potential homebuyers looking ahead to the spring homebuying season,” said Joel Kan, MBA vice president and deputy chief economist, in a press statement back in January. “Mortgage rates on most loan types decreased last week and the 30-year fixed rate reached its lowest level since September 2022 at 6.2 percent.”
But that was then, and this is now. And with rates on the rise again, that comeback has morphed into another round of declines in mortgage refinance applications and in purchase mortgage applications as well.
The 30-year fixed rate jumped back to 6.71 percent by the end of February. That, in turn, was enough to lower mortgage applications across the board by 6 percent, according to the MBA in its latest report.
Refinance loans fell 6 percent, while purchase loans dropped 3 percent.
In fact, it marked the third week of declines following as rates began to climb higher again at the start of February.
“The 30-year fixed rate increased to 6.71 percent last week, the highest rate since November 2022, which drove a 6 percent drop in applications,” the MBA’s Kan said, in a press release. “After a brief revival in application activity in January when mortgage rates dropped to 6.2 percent, there has now been three straight weeks of declines in applications as mortgage rates have jumped 50 basis points over the past month.”
The MBA economist added: “Data on inflation, employment, and economic activity have signaled that inflation may not be cooling as quickly as anticipated, which continues to put upward pressure on rates.”
Still, as the weather warms, some buyers are bound to come out to check out the listings as the spring market kicks off.
And there may be a reason to hope that at least the shock of those initial rate hike increases last fall have worn off.
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