Economic damage caused by the omicron version of the coronavirusIt is expected that demand for mortgages will be lower than originally thought. This has put interest rates on a downward trajectory. According to the Mortgage Bankers Association seasonally adjusted index, mortgage demand dropped 2.7% by 2021, as compared to two weeks ago. [The MBA did not release application volume last week due to the holidays.]

At 3.33%, the average 30-year fixed-rate interest rate on mortgages for conforming loans balances of $554,250 or less increased from 3.27% the previous week. The points rose to 0.48 (including the origination fees) for loans that have a 20% downpayment. This rate was 47 basis point lower than the previous week.

The number of applications to refinance home loans fell by 2% over the past week, and was 40% less year-over-year. Due to the continued weakness of the mortgage market, the refinance portion of mortgage applications increased to 65.4% from 63.9% last week.

Joel Kan, an MBA economist, stated that mortgage rates have climbed higher in the last two weeks as the markets kept an optimistic outlook on the economy. The decline in refinance demand is evident as many borrowers are refinanced by 2020 and 2021.

The rate of interest continued its climb this week. Rates rose sharply Tuesday, to their highest point since April, last year according to Mortgage News Daily. This calculates rates daily, not weekly.

Two weeks ago, mortgage applications for homes were down 4% and 12% respectively. It was the worst showing since Oct 2021. Low inventory and high interest rates caused a slowdown in home sales. CoreLogic says that prices for homes are continuing to rise compared to 2020. In November they were just 18% higher than in 2020.

Kan stated that “despite supply and affordability difficulties, 2021 was an unprecedented year for purchase originations.” “MBA expects that 2022 will be even more strong with total purchasing activity exceeding $1.74 trillion,” he said.