Borrowers’ demand for home loans slowed down last week as mortgage rates increased to their highest level in two months. This time the source of instability is not the Federal Reserve’s tightening monetary policy, but rather the ongoing discussions to raise the U.S. statutory debt ceiling in Congress.

In the mortgage market, the latest Mortgage Bankers Association (MBA) data published on Wednesday morning showed that loan applications decreased by 5.7% for the week ending May 12, 2023, compared to one week earlier. The survey, conducted weekly since 1990, covers over 75% of all U.S. retail residential mortgage applications.

Borrowers’ demand followed an increase in mortgage rates. The average 30-year fixed rate for conforming loans ($726,200 or less) rose to 6.57% last week from 6.48% the previous week. For jumbo loan balances (greater than $726,200), the rate grew to 6.46% from 6.33% in the same period, according to the MBA.  

Mortgage Loan Types
According to the MBA, refinancing applications declined 8% from the previous week and were 43% lower than the same week one year ago. Refinance applications comprised 27.4% of the total applications last week, compared to 28% the prior week.

On Monday, a new Federal Reserve Bank of New York report showed that, from the second quarter of 2020 to the fourth quarter of 2021, 14 million mortgages were refinanced, accounting for nearly one-third of the outstanding mortgage balances. 

Regarding loan types, the adjustable-rate mortgage (ARM) share of mortgage apps decreased to 6.5% of total applications last week from 6.8% in the previous week, the MBA data shows. The Federal Housing Administration loans’ share fell to 12% from 12.1% the week prior. The U.S. Department of Veteran Affairs loans’ share decreased to 12.2% from 12.9% in the same period. And the U.S. Department of Agriculture loans’ share remained at 0.4% of the total applications.

If you’re a buyer who is particularly rate sensitive, it may be beneficial to hold off on any major purchases until the volatility passes; however, if you’re a motivated buyer who needs to make a move, contact Metrowest today and let’s discuss your options!