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Housing Market Update: Mortgage Rates Keep Buyers at Bay


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A jump in mortgage rates helped push down applications for home loans for the week ending March 15, according to the Mortgage Bankers Association (MBA), signaling how rates are key in shaping activity in the housing market.

The average contract rate for a 30-year fixed rate for a loan worth at least $766,550 increased to nearly 7 percent after falling below that level recently. The rise discouraged buyers, with mortgage applications falling 1.6 percent. The refinancing activity, which improved the prior week, declined 3 percent, adding to the depressed activity in the market.

Mortgage rates are down from their peak of 8 percent last fall on the back of higher borrowing costs instituted by the Federal Reserve to battle record high inflation. While price rises have slowed in recent months, they are still above the central bank's target.

mortgage rates
A for sale sign outside a house on October 16, 2023 in Austin, Texas. An uptick in mortgage rates depressed activity in the housing market, lenders said. Brandon Bell/Getty Images

Data suggesting that inflation stubbornly exceeding the Fed's target of 2 percent—the Consumer Price Index came in at 3.2 percent in February—has led to concerns that it will take longer for borrowing costs to come down from their current 2-decade highs.

"Mortgage rates increased last week as incoming data showed inflation was still hotter than expected, which stoked concerns about the timing and extent to which the Fed might be able to reduce the fed funds rates this year," Joel Kan, the MBA's deputy chief economist, said in a statement shared with Newsweek.

"After three weeks of declines, the 30-year fixed mortgage rate increased to 6.97 percent."

The jump in rates meant that the average size of a loan for a mortgage applications has gone up substantially.

"Mortgage applications continued to show sensitivity to rate movements, and both purchase and refinance activity decreased over the week. With housing supply low and prices high, the average loan size for purchase applications increased to the highest level since May 2022," Kan added.

The MBA's data aligns with other indicators about what is happening in the mortgage market. On Tuesday, rates remain unchanged at 7.11 percent, according to Mortgage News Daily as the market awaits the Federal Reserve's decision on borrowing costs to come in on Wednesday.

"[It capped] a short but meaningful losing streak over the past six business days. During that time, the average 30 [year] fixed rate move[d] back into the low sevens and came close enough to the 2024 ceiling from three weeks ago," Mortgage News Daily's chief operating officer Matthew Graham said. "Impending events are set to either reinforce the ceiling or see it broken."

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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

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