Mortgage Rates Exceed 3%, Dropping Refinance Demand

Rates jumped to 3.26% for 30-year fixed-rate mortgages, shrinking the share of borrowers who could benefit from refinancing. As a result, mortgage refinance demand dropped 43% compared to one year ago, according to CNBC. This marks the first year-over-year drop since March 2019. Compared to just the week before, applications to refinance a home loan dropped 5%. At this time last year, mortgage rates began its dramatic drop as fears over the virus grew. The Mortgage Bankers Association says rising rates come as a result of faster economic growth, an improving job market, and increased vaccine distribution.

The refinance share of mortgage activity decreased to 64.5% of total applications from 67.5% the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.26% from 3.23%, with points decreasing to 0.43 from 0.48 (including the origination fee) for loans with a 20% down payment. While the weekly move is not that large, rates are now up 40 basis points since the start of this year.

“Signs of faster economic growth, an improving job market and increased vaccine distribution are pushing rates higher,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The run-up in mortgage rates continues to cool demand for refinance applications. Activity declined last week for the fourth time in five weeks.”

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