Mortgage rates settle after four weeks of increases

Mortgage rates were little changed this week after four weeks of marching higher. But the recent increases, which likely will resume, have already dampened refinance activity and pressured homebuyers to make a move.

The rate on the 30-year fixed mortgage — the most common home loan for buyers — edged down to 3.55% from 3.56% the previous week, according to Freddie Mac. The rate is still among the highest since March 2020 and is over a half-point higher than a month ago.

The mortgage rate for the 15-year loan — a popular refinance option — inched up to 2.80% this week from 2.79%.

Even with the slight decrease, “mortgage shoppers should not get used to it, as rates are pushing higher again this morning after Fed Chair Powell's press conference yesterday,” Keith Gumbinger, vice president of HSH.com, told Yahoo Money. “Interest rates are firming again and until inflation starts to show signs of cooling, odds favor higher than lower mortgage rates.”

‘Demand for refinances subsided’

Higher rates are curbing the once-hot refinance market. The volume of refinance applications dropped 13% last week, according to the Mortgage Bankers Association (MBA), and was 53% lower than a year ago when rates stood at 2.73%.

Refinances made up 55.8% of total mortgage applications, down from 60.3% the previous week.

“Unsurprisingly, borrower demand for refinances subsided, with applications falling for the fourth straight week,” Joel Kan, the associate vice president of economic and industry forecasting at MBA, said in a statement. “After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them.”

The population of high-quality refinance candidates who could shave three-quarters of a point from their mortgage rate fell to 5.8 million last week when the rate hit 3.56%, according to figures mortgage technology and data provider Black Knight previously gave Yahoo Money, down from 11 million in December.

'It’s still an attractive time to be a buyer'

Unlike the refi market, demand from homebuyers has yet to meaningfully fall off as rates rise, according to Sam Khater, Freddie Mac’s chief economist.

“History demonstrates that potential homebuyers who are on the fence will often enter the market at the start of rate cycle increases,” Khater said in a statement.

According to Freddie Mac, the monthly mortgage and interest payment on a conventional 30-year fixed rate mortgage is now over $2,000, or $300 more than this time last year.

“Even though rising home prices and mortgage rates have driven up the monthly cost of buying, rising rents, which surged by double-digits in 2021, are a key motivator for first-time home buyers,” said Danielle Halle, chief economist at Realtor.com.

And if rates continue to increase as expected — given Federal Reserve Chairman Jerome Powell’s comments this week on inflation — that could force more homebuyers’ hands.

“It’s still an attractive time to be a buyer,” Jeff Ruben, president of WSFS Mortgage, told Yahoo Money, “because if you continue to delay purchase, it will be more expensive for the same home.”

Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda

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