Mortgage rates moved slightly lower last week, but that wasn’t enough to revive borrower demand. Overall mortgage application volume fell 2.5% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The weekly data also includes an extra adjustment for the Memorial Day holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less slipped to 6.57% from 6.65%. Meanwhile, points rose to 0.67 from 0.65, including the origination fee, for loans with a 20% down payment.
“The prospect of easing energy prices given the evolving situation in the Middle East brought mortgage rates slightly lower last week,” said Joel Kan, vice president and deputy chief economist at the MBA. “The 5-year ARM rate inched up slightly, reflecting a flattening yield curve, as short-term rates are at risk of increasing while longer-term rates have dropped.”
Home purchase mortgage applications dropped 3% on the week, reaching their weakest level since April. Even so, demand remained 7% higher than the same week a year earlier, when mortgage rates were 35 basis points higher.
Refinance applications declined 2% over the week, though they were still 20% above the same period last year. Last week’s refinancing activity marked the slowest pace since last June.
Demand for adjustable-rate mortgages (ARMs) also weakened, as borrowers typically turn to them when interest rates are climbing. Mortgage rates have stayed largely unchanged so far this week, based on a separate Mortgage News Daily survey.
“Unlike the average trading day of late, bonds held inside a very narrow range AND didn’t visibly respond to any major Iran war news (and the typical oil price volatility that follows),” wrote Matthew Graham, chief operating officer at Mortgage News Daily. Bond markets may see a stronger reaction this Friday when the government releases the monthly employment report.
