The average rate on the most popular 30-year fixed mortgage fell for the third straight week, but mortgage demand was little changed.
Total mortgage applications rose 0.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This follows a surge in demand the previous week.
The average contract rate for 30-year fixed-rate mortgages with qualifying loan balances ($726,200 or less) fell last week from 6.77% to 6.73% for those with a 20% down payment.
The average contract interest rate on 30-year fixed-rate mortgages with large loan balances (greater than $726,200) increased to 6.80 percent from 6.79 percent for loans with a 20 percent down payment. This marked the second week in a row that interest rates on large loans were higher than on eligible loans.
“The last time large loan rates were higher was in December 2021,” MBA economist Joel Kan wrote in a release. Interest rates were raised in the process.”
Home loan refinance applications fell 2% this week and were down 40% from the same week a year ago.
Mortgage applications to buy a home rose 2% this week but were down 32% from a year earlier. Homebuyers are getting used to higher interest rates, but new listings of homes for sale have continued to decline, keeping sales low. FHA demand growth outpaced traditional loan demand.
“First-time homebuyers make up a significant portion of FHA purchase loans, and this increase suggests that while buyers are interested, activity continues to be constrained by low levels of affordable inventory,” Kan added.
Homebuilders are benefiting from this dynamic. Mortgage applications to buy newly constructed homes rose 17% in May compared to May 2022, according to the MBA. According to the US Census, single-family housing starts rose 18.5% in May compared to April, in line with demand.
Mortgage rates started the week off slightly, but that could change on Wednesday as investors react to testimony from Federal Reserve Chairman Jerome Powell before the House Financial Services Committee.