Mortgage rates remained relatively stable this week, but the demand for home-buying experienced a significant decline due to high borrowing costs.
Decrease in Mortgage Applications
In mid-July, the 30-year mortgage rate averaged at 6.87%. As a result, mortgage applications, both for purchases and refinancing, decreased by 1.8%. The Mortgage Bankers Association (MBA) reported that the market composite index, which measures mortgage application volume, fell to 206.9 for the week ending July 21. This is notably lower compared to the reading of 276 from the same time last year.
Discouragement among Home Buyers
One of the key factors contributing to the decline in mortgage applications is the high mortgage rates. Home buyers were deterred by these rates, resulting in a 2.5% decrease in the purchase index from the previous week.
Furthermore, the purchase index suffered a significant blow due to a sharp drop in Federal Housing Administration purchase applications, which witnessed a decline of 10.2%. This drop caused the index to reach its lowest level in a month.
Limited Interest in Refinancing
Homeowners did not perceive the current economic climate as favorable for refinancing their mortgages. As a result, the refinance index experienced a minor decrease of 0.4%.
Unchanged Average Contract Rate
The average contract rate for 30-year mortgages, specifically for homes sold for $726,200 or less, remained unchanged at 6.87% for the week ending July 21, according to the MBA.
Mortgage Rates Update
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 6.9%, down from 6.89% the previous week.
15-Year Mortgage Rate Increase
In contrast, the 15-year mortgage rate rose to 6.37%, slightly higher than last week’s 6.36%.
Adjustable-Rate Mortgages Show Improvement
Good news for those with adjustable-rate mortgages – the rate fell to 6.01% from last week’s 6.27%.
The Impact of the Federal Reserve Meeting
As the U.S. Federal Reserve meeting approaches, expectations are high that the central bank will raise its benchmark interest rate to the highest level in two decades. However, market observers are also looking for indications of whether the Fed plans to slow down rate increases due to signs of a cooling U.S. economy.
Mortgage Rates Reflecting Lending Conditions
While the Fed’s rate hike does not directly impact mortgage rates, expectations of tighter lending conditions can influence the 30-year mortgage rate. The average rate for the 30-year mortgage reached 7.04% as of Wednesday morning, ahead of the Fed decision, according to a separate survey tracked by Mortgage News Daily.
Market Reaction
In early morning trading on Wednesday, the yield on the 10-year Treasury note TMUBMUSD10Y reached above 3.8%.