Contractors work on concrete slabs in the Cielo at Sand Creek by Century Communities housing development in Antioch, California, on Thursday, March 31, 2022.
David Paul Morris | Bloomberg | Getty Images
The average rate on the popular 30-year fixed mortgage crossed over 7% on Tuesday, according to Mortgage News Daily. That is the highest level since early March.
Rates have been rising on a combination of concerns among investors. First, uncertainty over what the Federal Reserve will do with interest rates, given a still strong economy; second, the battle over raising the debt ceiling and the possibility of a U.S. default.
Both of those already had rates rising last week with mortgage demand pulling back. Total mortgage application volume dropped 4.6% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Last week, the weekly average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.69% for loans with a 20% down payment, according to the MBA. That rate was 5.46% the same week one year ago.
Mortgage applications to purchase a home dropped 4% for the week and were 30% lower than the same week a year ago.
“Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications,” said Joel Kan, MBA’s vice president and deputy chief economist
Applications to refinance a home loan decreased 5% from the previous week and were 44% lower than the same week one year ago. That is the lowest level in two months. Not only are there very few borrowers who could benefit from a refinance, given that rates were so much lower a year ago, but banks have been tightening lending due to recent bank failures.
Even if the debt crisis is resolved before a default, rates don’t have a lot of reason to move significantly lower any time soon.
“Credit the progressive improvement in bank sentiment, mixed but resilient economic data, and a Federal Reserve that has been steadfast in its reminders about their “higher for longer” rate mantra,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.
This story originally appeared on CNBC
