A real estate agent shows a house to a prospective buyer in Miami.
Mortgage demand continues to weaken, still at a 22-year low, but there was a sign in the weekly numbers that first-time buyers may be slowly returning.
According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage applications to buy a home fell 1% last week compared to the previous week. Volume was 21% lower than the same week a year ago. However, the demand for low down payment loans increased.
“Last week’s purchase results were mixed, with regular applications down 2% and government applications up 4%, a sign of activity among first-time homebuyers,” said Joel Kahn, MBA economist.
He also noted that the average purchase loan size continues to decline as home buying at the high end of the market weakens.
Mortgage rates increased for all loan types last week. The average contract interest rate for 30-year fixed-rate mortgages rose from 5.45% to 5.65% for payments ($647,200 or less).
As a result of the sharp increase in rates, demand for loan refinancing fell 3% for the week and was 83% lower than the same week a year ago.
Borrowers are also moving away from adjustable-rate loans, no longer offering the deals they did a few months ago.
“The spread between fixed-rate loans and ARM loans narrowed to 84 basis points from over 100 basis points in the previous week,” Khan said. “This movement made fixed-rate loans relatively more attractive than ARMs, further reducing ARM share from the highs seen earlier this year.”
Mortgage rates moved higher to start the week as the stock market sold off on renewed fears of a recession. Investors are looking forward to what the Federal Reserve will say at its meeting this weekend in Jackson Hole, Wyoming.