Mortgage rates have risen for the third consecutive week, reaching their highest level since January. Despite this increase, which saw the average contract interest rate for 30-year fixed-rate mortgages rise to 6.98%, the demand for home purchases has remained robust. According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage applications for purchasing homes increased by 2% from the previous week and are up 18% compared to the same time last year. Joel Kan, an economist with the MBA, noted that the rise in purchase applications is supported by increased housing inventory across various markets, which is helping to maintain transaction volumes amidst economic uncertainties.
Conversely, applications for refinancing have significantly declined, dropping by 7% week-over-week. However, refinance demand is still 37% higher than the same week last year. Conventional refinancing applications fell by 6%, while VA refinances saw a more substantial drop of 16%.
In an interesting shift, mortgage rates began to decrease slightly at the start of the holiday-shortened week, following a monthly report on consumer confidence, which demonstrated stronger-than-expected results. Despite the positive consumer outlook, concerns about labor market conditions surfaced. Matthew Graham from Mortgage News Daily explained that weaker labor market indicators typically drive rates lower. As a result, the underlying bond market improved, prompting several mortgage lenders to adjust their rates accordingly.
Overall, while purchase applications are thriving, the refinance market is facing challenges due to rising rates.
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