Mortgage refinance demand plunges 13% as interest rates climb toward two-year high

A home for sale in Susanville, CA.
Gary Coronado | Los Angeles Times | Getty Images

For mortgage lenders that rely heavily on the refinance of business, rising interest rates can cause major problems. The demand is just drying up.

For loans with a 20% downpayment, the average 30-year fixed-rate interest rate on mortgages has increased from 3.64% to 3.72%. This rate was lower than the previous week by 77 basis points.

According to seasonally adjusted indexes of the Mortgage Bankers Association, mortgage applications for refinance, which are very sensitive to rate movements, dropped 13% and 53% respectively. The rate has been rising for five consecutive weeks.

Joel Kan, an MBA economist and release writer, stated that “after almost two years at lower rates there aren’t many borrowers left with an incentive to refinance.” These higher rates have become less appealing to those still looking for refinances.

The week’s mortgage applications to buy a house fell by 2% and was 11% below a year ago. Buyers seem to be more active this year than they have been in the past, hoping to take advantage of spring’s hot market. Some are worried that they won’t be able afford to buy the house they desire, as mortgage rates rise and home prices continue to climb.

There were three potential buyers at an open house held in Waldorf Maryland last Sunday.

We thought prices would fall a bit because it was winter, but this is not the case. Rondie Robinson was on house hunting along with his daughter and wife.

The house’s price was right at the national median of $375,000 which indicates that supply is scarce. The highest level of activity in buying is at the high end. That is why $433,500 was the new record-breaking average purchase loan amount.

Robinson added that Robinson was caught between two rock walls: rising interest rates and rising costs.

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