DENVER, CO – Demand for mortgages decreased overall last week, despite the news that interest rates on home loans had dropped slightly after weeks of steady increases, showing that some buyers are taking a “wait and see” approach to home buying amid the economic stress being experienced by many as of late.
As per the Mortgage Bankers Association’s seasonally adjusted index, the total volume of mortgage applications submitted to lenders last week dropped by two percent when compared to the week before, and dropped an additional one percent over the course of the week; this represents an overall drop of 18 percent year-over year.
The lessened demand for mortgages as of late – despite the slight drop in interest rates – has been driven mainly by increased overall interest rates caused by the Federal Reserve’s aggressive attempts to curb the current 40-year high inflation that is gripping the nation at the moment – with many worried that the economy is on the verge of entering a recession – coupled with worries that home values will begin to plummet if that happens.
At the moment, the average interest rate on a 30-year fixed-rate mortgage fell to 5.45 percent last week, as compared to the week prior when that rate was 5.47; points decreased from 0.80 to 0.57 – and down from 3 percent during the same week in 2021 – for loans where the buyer put down a 20 percent down payment.
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Due to the currently high interest rates – even with last week’s slight dip in percentages – there is not much of a financial incentive for buyers to pursue a refinance loan for their current home as well, which is reflected in last week’s 5 percent decrease in applications and the overall 82 percent drop year-over-year.
As of this week, home mortgage interest rates have been holding for the most part, without much in the way of fluctuation, but with the Federal Reserve slated to release the minutes from their latest meeting this week, that could be the impetus for change, driving loan rates either higher or lower, depending on the outcome. A monthly retail sales report just released will draw attention from investors, and will possibly have as much impact – if not more – then the info from the Fed.
Nonetheless, experts say that either report – be it the Fed’s or retail sales – shouldn’t have that great of an overall impact upon the going home mortgage interest rates unless they indicate that economic conditions have improved or plummeted far more significantly than is currently anticipated. But as of now, the volatility conditions of the loan marketplace have pushed prospective homebuyers and refinancers to bide their time and wait for things to improve, which will hopefully happen sooner rather than later.