Last week, the average rate on the 30-year fixed mortgage reached the highest level since 2000, while adjustable-rate mortgage (ARM) rates fell. This shift led to increased demand for ARMs, causing a slight uptick in total mortgage application volume. Specifically, the Mortgage Bankers Association’s seasonally adjusted index increased by 0.6% from the previous week.
While the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances rose to 7.67%, the average contract interest rate for 5/1 ARMs decreased to 6.33%. ARMs typically offer lower rates due to their shorter fixed terms, but the difference between ARM rates and the 30-year fixed rate had recently been narrow, although it widened last week.
Applications for refinancing home loans inched up by 0.3% from the previous week but were 9% lower than the same week one year ago. Meanwhile, applications for mortgages to purchase homes increased by 1% for the week but remained 19% lower than the same week in the previous year.
The average loan size has reached its lowest level since 2017, indicating that most activity is occurring in the lower end of the housing market. At the higher end, buyers often use all-cash transactions, and in the middle range, affordability challenges have led to a stagnant market.
Real estate agents have observed plenty of potential buyers looking but not making purchases, suggesting a slowdown in buying activity despite an increase in housing inventory. Higher interest rates have led to fewer buyers making actual purchases, resulting in more foot traffic but fewer transactions.
