The 7 percent mortgage rate is back with a vengeance, sending homeowners and prospective buyers scurrying from the market.
The contract rate last week on the average 30-year fixed-rate mortgage with conforming loan balances ($766,550 or less) rose by 19 basis points to 7.06 percent, according to the Mortgage Bankers Association. The rate for the week ending on Feb. 16 was the first to exceed 7 percent this year.
Rates have been rising for several weeks, but the 7 percent threshold is a critical one in the eyes of many residential real estate agents. The market is stronger when rates are below that mark, even if it’s a matter of perception for homebuyers. Rates are still a good distance off from the fall’s peak of nearly 8 percent.
In terms of activity, the rate jump — which MBA chief economist Mike Fratantoni attributed to last week’s inflation report and the fading hopes of interest rate cuts in the near future — dampened the market. Mortgage loan applications dropped 10.6 percent from the previous week on a seasonally adjusted basis.
Purchase-loan applications decreased 10 percent on a seasonally adjusted basis from the previous week. On an unadjusted basis, it dropped 6 percent from last week and was 13 percent below the levels last year.
The refinancing index, meanwhile, also fell a whopping 11 percent from the previous week, though it was up marginally from a year ago.
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The refinancing share of total activity decreased from 34 percent the prior week to 32.6 percent last week. The FHA share of applications fell from 13.5 percent to 13.2 percent, while the VA share dropped from 13.3 percent to 12.1 percent and the USDA share ticked up slightly to 0.5 percent.
The average contract interest rate for a 30-year rate with jumbo loan balances increased 16 basis points to 7.16 percent. The average contract interest rate for a 15-year fixed-rate mortgage jumped from 6.53 percent to 6.61 percent.