Published by CNBC | March 2, 2022
While mortgage rates rose to the highest level in two years last week, they have since fallen quite sharply due to the war in Ukraine.
Mortgage demand stalled last week, as interest rates hit a multi-year high, but that will likely change quickly. Rates are now falling fast due to the Russian invasion of Ukraine.
Mortgage application volume was essentially flat compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Borrowers had no incentive to refinance, and homebuyers continue to face high prices and a severe lack of listings.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.15% from 4.06%, with points decreasing to 0.44 from 0.48 (including the origination fee) for loans with a 20% down payment.
Applications to refinance a home loan increased 1% for the week but were still 56% lower than the same week one year ago. Rates were 92 basis points lower a year ago, so there were far fewer borrowers who could benefit from a refinance. The refinance share of mortgage activity decreased to 49.9% of total applications from 50.1% the previous week.
Mortgage applications to purchase a home fell 2% for the week and were 9% lower year over year. Buyers are now seeing prices appreciate at the fastest pace in more than 45 years, up just over 19% from a year ago in January, according to a new report Tuesday from CoreLogic. As a result the average loan size increased to yet another record high of $454,400.
These dynamics will likely now shift, due to a sharp drop in mortgage rates last week. The war in Ukraine has caused investors to rush into the bond market, which resulted in lower yields.
Federal Reserve Chairman Jerome Powell has said that the central bank still plans on raising interest rates despite the “highly uncertain” economic effects of the war in Ukraine.
“The bottom line is we will proceed but we will proceed carefully as we learn more about the implications of the Ukraine war,” Powell told the House Financial Services Committee last week.
