The Federal Reserve cut its benchmark interest rate last week, and just as happened the last two times, mortgage rates rose. That caused demand for home loans and refinances to drop.
Total mortgage application volume fell 3.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, 806,500 or less, increased to 6.38% from 6.33%, with points increasing to 0.62 from 0.60, including the origination fee, for loans with a 20% down payment.
“Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle. As a result, mortgage applications declined slightly,” said Mike Fratantoni, MBA’s SVP and chief economist in a release.
Applications to refinance a home loan fell 4% for the week and were 86% higher than the same week one year ago. Last year at this time, the rate on the 30-year fixed was 37 basis points higher. While that is not a huge difference, borrowers who may have taken out a loan two years ago, when rates were well over 7%, could now benefit from a refinance.
