Mortgage Rates - May 2023

Mortgage applications for purchasing a home saw a decline of 4.8%, according to the Mortgage Bankers Association's seasonally adjusted index. Compared with the same time one year ago, volume is down by 26%. Experts are attributing this decrease to higher mortgage rates and limited availability of homes for sale. Joel Kan, an MBA economist, stated: “Buyers remain hesitant due to rate volatility and scarcity of housing inventory in many areas across the country.”

 

Statistics from the week ending April 16, 2021 have indicated an increase in the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less. This rate has increased to 6.57% from 6.48%, with points remaining at 0.61 (including the origination fee) for loans with 20% down payment. This is the highest rate we've seen in two months and a full percentage point higher than the same week one year ago when these loans were listed at a 5.49%.

 

Last week saw a rise in mortgage rates despite Treasury yields remaining steady. Specifically, the gap between the 30 year-fixed rate and the 10-year Treasury rate ballooned to 310 basis points. According to Matthew Graham, chief operating officer of Mortgage News Daily, this divergence is largely attributed to the Federal Reserve ceasing reinvestment efforts on their bond portfolio since 2022. In addition, elevated supply of mortgage debt stemming from the FDIC’s liquidation attempts have also created downward pressure on rates in this sector.

 

Mortgage refinancing applications declined 8% during the week, due to their sensitivity to fluctuating rates. A staggering 43% drop year-over-year was observed as those who could benefit from refinances have been disproportionately affected by rate increases of more than double over the last several months. With so few borrowers left that can benefit from refinancing, demand has plummeted.