Mortgage Rates Hit a New Record as Home Prices Continue to Climb
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $647,200 or less rose from 3.83% to 4.05% last week, causing a 1% drop in mortgage applications to buy a home, CNBC reports. The same rate was 107 basis points lower the same week one year ago, revealing a slow but steady rise as home prices also continue to climb.
Fluctuating mortgage rates have followed the trajectory of Treasury yields, which moved higher in the last week as a result of inflationary pressures and more aggressive policy moves by the Federal Reserve in 2022. The monthly increase in mortgage rates has significantly reduced refinance demand, driving application volume down 9% for the week and dropping to a 54% year-over-year decline.
“Purchase applications saw a modest decline over the week, with government purchase applications accounting for most of the decrease,” said Joel Kan, an MBA economist. “Prospective buyers still face elevated sales prices in addition to higher mortgage rates. The heavier mix of conventional applications again contributed to another record average loan size at $453,000.”
Home prices have been climbing steadily as demand continues to outstrip the supply of houses for sale. While the increases had moderated at the end of last summer, they are now widening again. Prices nationally were up 18.5% year over year in December, according to the most recent report from CoreLogic.