The average rate on a 30-year fixed-rate mortgage with conforming loan balances increased this week to 3.64%, still relatively low from a historical perspective. But rates were below 3% several months ago when John, of Georgetown, Texas, decided to refinance his mortgage and contacted eight lenders.
“The mortgage rates and closing costs varied widely,” John wrote in a ConsumerAffairs review. “I ended up refinancing my mortgage with Jake at Network Capital. Jake was able to save me 22% off my original home mortgage.”
But fewer current homeowners like John are refinancing this week since the opportunity to get a lower rate has largely passed, at least for now. The Mortgage Bankers Association (MBA) reports that the number of refinancing applications plunged by 3% from the previous week. It was 49% lower than one year ago.
"Mortgage rates hit their highest levels since March 2020, leading to the slowest pace of refinance activity in over two years,” said Joel Kan, MBA's associate vice president of Economic and Industry Forecasting.
Some home buyers getting more serious
Kan says the average 30-year fixed-rate mortgage has increased 30 basis points in just two weeks, primarily due to a recent spike in the yield on the 10-year Treasury bond. Mortgage rates are keyed to the 10-year bond.
Kan says the increase in mortgage rates may have slowed refinancing activity, but it has also caused some prospective home buyers to get more serious.
"Despite the increase in rates, purchase applications jumped almost 8 percent, with conventional purchase applications accounting for much of the stronger activity,” Kan said. “The average loan size for a purchase application set a record at $418,500.”
Realtors report that demand for homes remains strong despite rising mortgage rates. But according to Kan, buyers are facing challenges to finding homes in their price range, especially with the cost of financing going up.
Every rise in rates makes monthly payments more expensive. A 0.5% increase in interest rates on a 418,500 mortgage increases the monthly payment by $115.