Mortgage Rates Surge Higher Again, Causing Homebuyers to Pull Back

• After a brief decline in December and January, mortgage rates are on the rise again. The average contract interest rate for 30-year fixed-rate mortgages increased to 6.87% from 6.80% the previous week, marking the highest rate since early December 2023.
• The increase in mortgage rates is affecting mortgage demand, with total mortgage application volume falling by 2.3% compared to the previous week, and both applications for home purchases and refinancing showing declines.
• Applications to refinance a home loan dropped by 2.0% for the week but were still 12.0% higher than the same week one year ago. Despite rates being half a percentage point higher than a year ago, recent rate drops from a 20-year high have prompted some borrowers to seek savings through refinancing.
• Purchase applications for mortgages to buy homes decreased by 3.0% for the week and were 12.0% lower than the same week a year ago. Affordability challenges, elevated mortgage rates, and low existing housing inventory are cited as factors contributing to the subdued purchase activity in the housing market. Harsher winter weather is also noted as a factor limiting house hunters' activities.
• Additionally, a recent government report on inflation causing rates to surge even higher is highlighted, with the average rate on the 30-year fixed reaching 7.08%, leading to immediate reactions in the bond market and prompting mortgage lenders to raise rates.

(Source: CNBC)