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Two straight weeks of record low mortgage rates brought consumers back to their lenders, but rates may now be reversing course.
Mortgage application volume rose a significant 6.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This after they pulled back slightly the week before.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.06% from 3.14%, with points dropping to 0.33 from 0.39 (including the origination fee) for loans with a 20% down payment.
“Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of virus cases. Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows,” said Joel Kan, an MBA economist.
Mortgage applications to refinance a home loan, which are most rate sensitive, jumped 9% for the week and were 47% higher than the same week one year ago. The annual comparison, while still strong, has been shrinking dramatically over the last several weeks.
The refinance share of mortgage activity increased to 65.7% of total applications from 63.9% the previous week. That is the highest share since April.
Mortgage applications to purchase a home rose 2% for the week and were a strong 22% higher than the same week one year ago.
“While this was still positive news for the purchase market, the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months, even as low mortgage rates continue to provide support,” added Kan.
That support from low rates may also be waning. Mortgage rates rose sharply Tuesday amid a sell-off in the bond market. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury.
“Rates rose as fast as they’ve risen since early June, ultimately hitting the highest levels in more than 2 weeks,” wrote Matthew Graham, chief operating officer at Mortgage News Daily in an article Tuesday evening. “Days like today should serve to increase our level of caution when it comes to assuming rates will continue to move lower. Also, it should argue for an increased level of preparation so we can make sure we can take advantage of opportunities to capitalize on any potential rate recovery.”