Mortgage refinance demand plunges 60%, as rates hit their highest level since 2018

People wait to visit a house for sale in Floral Park, Nassau County, New York.

Wang Ying | Xinhua News Agency | Getty Images

Mortgage rates took another jump higher last week, taking their toll on current borrowers who might have wanted to refinance. Demand from homebuyers, however, appears to be hanging in for now.

Total mortgage application volume decreased 6.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.80% from 4.50%, with points decreasing to 0.56 from 0.59 (including the origination fee) for loans with a 20% down payment.

“Mortgage rates jumped to their highest level in more than three years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve,” said Michael Fratantoni, MBA’s chief economist.

Driving the downturn in overall mortgage demand was a 15% weekly drop in refinance applications. They are now down a whopping 60% from a year ago. The refinance share of mortgage activity decreased to 40.6 percent of total applications from 44.8% the previous week.

Mortgage applications to purchase a home increased 1% for the week but were 10% lower than the same week one year ago. Homebuyers today continue to face sky-high prices and record low supply, in addition to rising mortgage rates. Affordability is weakening dramatically, but some real estate agents say the competition is not letting up.

“I will say I have had more cash buyers this this year than I’ve ever had, and they’re borrowing from parents. They’re just finding that cash because they know that it’s more competitive with cash offers,” said Kelly Theriot McMahon, a real estate agent with Compass in Dallas.

At an open house held last Sunday, she said buyers were steeling themselves for a bidding war.

“You have to look at it knowing you’re probably going to have to offer like $40,000 over asking price,” said Lauren Poey, a potential buyer touring the home.

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