Mortgage applications to buy a home rose 8% last week from the previous week, buoyed in part by demand for adjustable-rate mortgages, according to the Mortgage Bankers Association’s seasonally adjusted index. Requests, however, were 10% lower than they were the same week a year ago.
A sharp rise in mortgage rates may actually have spurred demand from homebuyers, perhaps because consumers feared rates would rise even further. Mortgage rates hit their highest level since 2008, while making their biggest one-week jump last week in 13 years.
Meanwhile, the average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) rose from 5.65% to 5.98%, with points from 0.71 to 0.77 (including origination fees) for loans with a rate of 20%. advance payment. Rates are now almost double what they were a year ago.
Read more: Sales of existing homes fell in May
“Purchase requests increased for the second week in a row – driven primarily by conventional apps – and the share of ARM apps rebounded to more than 10%,” wrote MBA economist Joel Kan. “The average loan size, at just over $420,000, is well below its peak of $460,000 earlier this year and is potentially a sign that home price growth is slowing.”
Variable rate mortgages offer lower interest rates and can usually be fixed for terms of five, seven or 10 years. Although these loans are considered riskier, as they have the potential to adjust to higher or lower rates, they are much more tightly secured than they were during the last housing boom more of ten years, which ultimately led to an epic real estate crash.
Buyer demand may also increase as the supply of homes for sale finally increases. Nationally active inventory is now up 17% year over year according to Realtor.com. Homes are now selling faster than a year ago.
Home loan refinance applications fell 3% for the week and were 77% lower than the same week a year ago. The refinance share of mortgage activity fell to 29.7% of total applications, from 31.7% the previous week.