Purchase loan demand jumps 9% as mortgage rates fall

Rates have rebounded this week as bond market investors weigh the prospect that the economic fallout from Russia’s invasion of Ukraine could fuel inflation.

Demand for mortgages surged last week as interest rates retreated from recent highs, helped by a flight to bond safety by investors seeking protection from the economic uncertainty created by the war in Ukraine.

Mortgage rates have since rebounded as investors weigh the prospect that the economic fallout from Russia’s invasion of Ukraine could eventually lead to higher energy costs fueling inflation.

According to a daily index of rate lock data compiled by Optimal Blue, 30-year fixed-rate mortgage rates topped 4% on February 10 for the first time since December 2019, as inflation figures are high and the prospect of Federal Reserve tightening. spooked bond market investors who fund most mortgages.

But mortgage rates fell after Russia invaded Ukraine on Feb. 24, prompting investors to sell riskier stocks and buy government debt and mortgage-backed securities. Since bond prices and yields move in opposite directions, the flight to safety has lowered mortgage rates, but only temporarily.

the Blue Mortgage Market Optimal Indices show that after hitting a 2022 high of 4.19% on Feb. 25, 30-year fixed rates fell below 4% on March 1. shows.

In the week ending March 4, demand for purchase loans by potential buyers jumped a seasonally adjusted 9% from the previous week, according to the Mortgage Bankers Association. Weekly Mortgage Application Survey. Compared to a year ago, however, demand for purchase loans is down 7%.

Refinance applications were up 9% week-over-week, but down 50% from a year ago, when mortgage rates were closer to record lows set during the pandemic.

Joel Can

“Mortgage rates fell for the first time in 12 weeks as the war in Ukraine spurred an investor flight to quality, which pushed US Treasury yields lower,” MBA’s Joel Kan said at About last week’s rate moves. “Looking ahead, the potential for higher inflation amid disruptions in oil and other commodity flows will likely lead to a period of rate volatility as these effects work against each other.”

Kan characterized the increase in refinance applications as a “slight rebound,” with a larger gain in refinancing of FHA, VA and USDA-backed loans.

“Buying activity also increased as potential buyers acted on lower rates and the early start of the spring buying season,” Kan said. “Average loan size remained near record highs as high-balance loan applications continued to dominate growth.”

The MBA released average rates last week for the following types of loans:

  • For a fixed rate of 30 years conforming mortgages (loan balances of $647,200 or less) rates averaged 4.09%, down from 4.15% the previous week. With points remaining unchanged at 0.44 (including origination fees) for 80% loan-to-value (LTV) loans, the effective rate also declined.
  • Rates for the 30-year fixed rate giant mortgages (loan balances greater than $647,200) averaged 3.79%, down from 3.88% the previous week. With points dropping from 0.40 to 0.39 (including origination fees) for 80% LTV loans, the effective rate has also fallen.
  • For a fixed rate of 30 years FHA Mortgages, rates averaged 4.12%, down from 4.15% the previous week. With points dropping from 0.74 to 0.73 (including origination fees) for 80% LTV loans, the effective rate has declined.
  • Rates for 15-year fixed rate mortgages, popular with homeowners refinancing, averaged 3.39%, down from 3.47% the previous week. With points dropping from 0.47 to 0.46 (including origination fees) for 80% LTV loans, the effective rate has also declined.
  • For 5/1 adjustable rate mortgages (ARMs), rates averaged 3.38%, down from 3.44% the previous week. With points dropping from 0.35 to 0.28 (including origination fees) for 80% LTV loans, the effective rate has declined.

All eyes will be on Federal Reserve policymakers next week, who wrap up their next two-day meeting on March 16.

the FedWatch CME Toolwhich monitors futures to calculate the likelihood of Fed rate hikes, shows markets on Wednesday priced a 98% chance the Fed would raise the fed funds rate by 25 basis points, but only 1.7% of odds of a base 50-point rate increase.

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