Mortgage rates went up again last week. But the increase did not reduce demand for mortgages, as buyers sought new construction homes.
Total mortgage application volume increased 3% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the June 19th holiday.
Mortgage applications to buy a home were up 3% for the week, but were down 21% year-over-year. These applications have risen for three consecutive weeks to the highest level since early May, despite the fact that mortgage rates remain high.
“New home sales have been driving buying activity in recent months as buyers look beyond the existing home market,” Joel Kan, vice president and deputy chief economist at MBA, said in a statement. “Existing Home Sales continued to be held back by the lack of inventory for sale as many potential sellers are holding on to their lower rate mortgages.”
Sales of new construction homes in May shot up 12% compared to April and were 20% higher than May 2022, according to the report US Census Tuesday Builders are fueling demand in part by offering incentives, such as paying mortgage rates.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.75% from 6.73%, and points remained at 0.64 (including origination fee). for loans with a 20% down payment. pay. The average rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased more sharply to 6.91% from 6.80%.
“The spread between the jumbo and conforming rates widened to 16 basis points, the third week in a row that the jumbo rate was higher than the conforming rate,” Kan said. «To put this in perspective, from May 2022 through May 2023, the jumbo rate averaged about 30 basis points less than the conforming rate.»
The widening of the spread and the increase in the jumbo rate stem from the recent bankruptcies of regional banks. Lenders have jumbo loans on their balance sheets, because Fannie Mae and Freddie Mac don’t buy loans that size. Bank credit, especially at community banks, has tightened substantially, resulting in higher rates.
Applications to refinance a home loan were up 3% on the week, but were 32% lower than the same week a year ago. The vast majority of borrowers today have mortgages with interest rates below 4%.