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Demand for purchase loans ebbed last week as rising mortgage rates threatened to put a damper on the spring homebuying season, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).

The MBA’s Weekly Applications Survey showed requests for purchase mortgages were down by a seasonally adjusted 1 percent from the week before and 14 percent from a year ago, reversing after two consecutive weeks of rising demand. Requests to refinance were also down 3 percent week over week and 3 percent from a year ago.

Joel Kan

“Mortgage rates increased last week as incoming data showed inflation was still hotter than expected, which stoked concerns about the timing and extent to which the Fed might be able to reduce the fed funds rates this year,” MBA Deputy Chief Economist Joel Kan said in a statement. “Mortgage applications continued to show sensitivity to rate movements, and both purchase and refinance activity decreased over the week.”

With housing supply low and prices high, the average loan size for purchase applications was $445,000 — the highest level since May 2022, Kan said.

In a forecast released Tuesday, economists at Fannie Mae said they no longer expect mortgage rates to drop below 6 percent this year or next, and that the recent surge in mortgage rates could take some of the bounce out of a projected rebound in 2024 home sales.

Mortgage rates on the rise again

Loan lock data tracked by Optimal Blue showed borrowers were locking in rates on 30-year fixed-rate mortgages Tuesday at an average rate of 6.88 percent, up 38 basis points from a 2024 low of 6.50 percent registered on Feb. 1 and approaching this year’s high of 6.93 percent registered on Feb. 28.

Last year rates climbed to a high of 7.83 percent on Oct. 25 before retreating in November and December on expectations for Fed rate cuts in 2024 that have yet to materialize.

For the week ending March 15, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $766,550 or less), rates averaged 6.97 percent, up from 6.84 percent the week before. Although points decreased to 0.64 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate increased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $766,550) averaged 7.14 percent, up from 7.04 percent the week before. With points increasing to 0.54 from 0.38 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.89 percent, up from 6.77 percent the week before. With points increasing to 1.04 from 0.95 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • Rates for 15-year fixed-rate mortgages averaged 6.49 percent, up from 6.37 percent the week before. Although points decreased to 0.70 from 0.77 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 6.33 percent, down from 6.38 percent the week before. Although points increased to 0.55 from 0.52 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.

Jumbo-conforming mortgage spread narrows in March

After growing wider this year due to worries about the impact of commercial real estate loans on regional banks, the “spread” between jumbo and conforming mortgage rates has begun to narrow in March.

The jumbo-conforming mortgage rate spread widened from an average of 16 basis points in 2023 to 42 basis points during the first two months of 2024. From March 1 through March 19, Optimal Blue data shows the spread has narrowed to 30 basis points.

Jumbo mortgages that exceed mortgage giants Fannie Mae and Freddie Mac’s loan limits, and “non-QM” loans, which don’t meet Fannie and Freddie’s underwriting requirements, accounted for 11 percent of mortgage loan dollar volume in February, according to Optimal Blue’s latest Originations Market Monitor.

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Email Matt Carter

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