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Weak mortgage demand could get a big boost

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Signage for an open house at Washington DC’s Real Estate For Sale sign.

Saul Loeb | AFP | Getty Images

Last week’s stagnant mortgage demand was due to interest rates hitting a multi-year high. However, that is likely to change soon. The Russian invasion of Ukraine is causing rates to fall quickly.

The seasonally adjusted index of the Mortgage Bankers Association showed that mortgage applications were essentially flat this week compared to the previous week. The index showed that there was no incentive for borrowers to refinance and that homebuyers still face extremely high prices and low listings.

For loans with at least 20% down, the average 30-year fixed-rate interest rate on mortgages has increased from 4.06% to 4.15%.

Refinance applications for a home loan were up 1%, but they were 56% less than one year ago. The rate was 92 basis points less than it was a year ago. This means that there are far fewer homeowners who can benefit from refinance. From 50.1% last week, the refinance portion of mortgage applications decreased to 49.9%.

The week saw a 2% decline in mortgage applications for home purchases, while they were 9.9% lower over the same period last year. CoreLogic’s Tuesday report shows that buyers are seeing home prices rise at the fastest rate in over 45 years. This is just over 19% more than a year ago. The average loan amount reached a record $454,400.

Due to the aforementioned, these dynamics are likely to change. sharp drop in mortgage ratesThis week. Investors have rushed to buy bonds in the wake of the conflict in Ukraine, which has resulted in lower yields. The yield on the U.S. 10 year Treasury is closely followed by mortgage rates. Mortgage News Daily reported that the average fixed rate for the 30-year term fell 28 basis point in the past 2 days.

Going into the year, there was expectation that mortgage rates would continue to rise as the Federal Reserve reduced its purchase and hold of mortgage-backed securities. As the Fed hasn’t made any significant changes in its plans for this, it could be that mortgage rates drop quickly. Lower mortgage rates will keep home prices rising, due to the extreme imbalance between record-low supply and high demand.

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