Weak demand for mortgages can get a big boost

The sign for the sale of real estate on the house shows an upcoming open house in Washington, DC.

Saul Loeb AFP | Getty Images

Demand for mortgages stopped last week as interest rates peaked for many years, but that is likely to change quickly. Tariffs are now falling rapidly due to the Russian invasion of Ukraine.

According to the seasonally adjusted index of the Association of Mortgage Bankers, the volume of mortgage applications was almost equal compared to the previous week. Borrowers had no incentive to refinance, and home buyers continue to face high prices and a severe lack of ads.

The average agreed interest rate for 30-year fixed-rate mortgages with corresponding loan balances ($ 647,200 or less) increased to 4.15% from 4.06%, decreasing to 0.44 from 0.48 (including the grant fee) for loans with a 20% reduction payment.

Home loan refinancing applications increased by 1% for the week, but were still 56% lower than the same week a year ago. Interest rates were 92 basis points lower a year ago, so there were far fewer borrowers who could benefit from refinancing. The share of refinancing of the mortgage activity decreased to 49.9% of the total applications from 50.1% in the previous week.

Applications for mortgages to buy a home fell 2% for the week and were 9% lower during the year. Buyers are now seeing prices rise at the fastest pace in more than 45 years, up just over 19 percent from a year ago in January, according to a new report Tuesday by CoreLogic. As a result, the average loan amount increased to another record high of $ 454,400.

This trend is likely to change now due to a sharp drop in mortgage rates this week. The war in Ukraine has forced investors to rush into the bond market, leading to lower yields. Mortgage rates are weakly following the yield on the 10-year US Treasury. The average interest rate on the 30-year fixed has fallen by 28 basis points in the last two days alone, according to Mortgage News Daily.

Expectations this year were that interest rates would move steadily as the Federal Reserve eased purchases and holdings of mortgage bonds. The Fed has not made any changes to its plan so far, so it is possible that the decline in mortgage rates will be short. Lower mortgage rates will continue to push up house prices, especially given the drastic imbalance between record low supply and strong demand.