The Mortgage Bankers Association on Wednesday said its weekly measure of the average contract rate on a 30-year, fixed-rate mortgage climbed to 3.64% in the week ended Jan. 14 from 3.52% a week earlier. That was the highest since March 2020 when the pandemic triggered a recession and drove borrowing costs to historic lows as the Fed cut its benchmark interest rate to near zero.
With inflation running at the highest rate in a generation and the job market near full employment, the Fed is now seen rapidly reining in the accommodation it put in place in the spring of 2020, and financial markets are frantically repricing for an initial rate hike by the central bank by mid-March.
That reset has driven up the yields on the Treasury securities that influence mortgage rates, and home financing costs have followed suit: MBA’s 30-year contract rate has climbed from 3.27% in mid-December.
The rate rise is crimping application volumes for mortgage refinancings, but appears to be helping to lift applications for home-purchase loans, which saw the largest increase in six months last week as prospective buyers looked to lock in rates that, while rising, are still historically low.
Overall loan application volumes rose 2.3% last week on the back of a 7.9% increase in loans to buy a home, while refinancing applications dropped 3.1% to their lowest level in more than two years.
Source: Economy - investing.com
