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Demand for mortgages picked up for a second straight week last week as would-be homebuyers took advantage of falling mortgage rates, but worries about inflation data cast doubt on the timing of expected rate cuts from the Federal Reserve. Weekly interest rates will pick up. .
Applications for home purchase loans rose 5% on a seasonally adjusted basis last week from the previous week but were down 11% from a year earlier, according to the Mortgage Bankers Association’s (MBA) weekly survey of lenders.
MBA surveys previously showed that home purchase loan applications surged a seasonally adjusted 11% in the week ended March 1, reversing a five-week decline in mortgage rates that had fallen from their 2024 highs.
Mike Fratantoni
“Mortgage rates fell below 7% for most loan types last week as upcoming economic data showed a weak service sector, a less robust job market, rising unemployment, and downward revisions to job growth data from previous months,” MBA officials said. .” Economist Mike Fratantoni said in a report statement.
Falling mortgage rates are a bigger incentive for homeowners seeking to refinance their existing mortgages, with refinance applications rising 12% last week and up 5% from a year ago. Applications for refinancing government-backed FHA, VA and USDA loans surged 24%.
“While these percentage increases are significant, the level of refinancing activity remains quite low, and we expect much of the activity to reflect borrowers at or near the peak of interest rates over the past two years,” Fratantoni said.
Refi applications accounted for 31.6% of all mortgage applications last week, up from 30.2% the week before, while adjustable-rate mortgage (ARM) loans accounted for 7.7% of total applications.
The latest Consumer Price Index (CPI) released on Tuesday showed that inflation remained high at 3.2% in February, and mortgage rates rose again this week.
Mortgage rates rise again
Tracked Loan Lock Data best blue It showed borrowers locked in a 30-year fixed-rate mortgage rate on Tuesday at 6.74%, up 24 basis points from the 2024 low of 6.50% recorded on February 1.
Optimal Blue data shows rates still have a long way to go before recovering from the 2024 peak of 6.93% set on February 28, let alone the 2023 high of 7.83% set on October 25.
Produced in 10-Year Treasury Bondwhich area good indicator On Wednesday, bond market investors became increasingly confident that the Federal Reserve will not cut interest rates before June.
this CME Group Fed Watch ToolAn agency that tracks futures markets to gauge the likelihood of the Fed’s next move showed on Wednesday that investors saw only a 10% chance of a rate cut in May, down from 34% on February 13. The futures market on Wednesday was pricing in a 65% chance of one or more rate cuts by June 12, down from 74% on February 13.
Rising housing costs and gasoline prices contributed more than 60% to February’s CPI increase. But core inflation, which excludes volatile food and energy prices, fell to 3.8% from 3.9% in January.
Economists at Pantheon Macroeconomics said the fall in core inflation was “less convincing than we had expected” but did not “change the picture, with core inflation still facing one of the downside pressures as wage growth slows, supply chains Normalization and the end of the economy”. Post-pandemic surge in gross margins. “
Pantheon economists said in the latest U.S. Economic Monitor on Tuesday that they still expect the 10-year Treasury yield to fall nearly a percentage point by year-end to 3.25%.
There will be some bumps in the road – air ticket prices rose 3.6% in February and car rental costs rose 3.8% – but Pantheon economists think this is unlikely to continue.
“The bottom line is that slower wage inflation will depress trends in most core non-rental services this year, regardless of what happens in individual months,” Pantheon economists wrote. “Every indicator we track points to wage growth It’s much slower and that’s much more important than the occasional craziness in some quarters.”
Federal Reserve’s Preferred inflation indicatorThe personal consumption expenditures (PCE) price index is closer to the Fed’s 2% inflation target, falling to 2.4% in January.
PCE and core PCE trend downward
Core personal consumption expenditures, which excludes food and energy costs, fell to 2.8%, the lowest reading since March 2021. personal consumption expenditure index The February version will be released on March 29th.
For the week ending March 8, MBA reported average interest rates for the following types of loans:
- 30-year fixed rate interest rate Qualified Mortgage (loan balances of $766,550 or less) averaged 6.84%, down from 7.02% the previous week. For an 80% loan-to-value (LTV) loan, the points drop from 0.67 (including origination fee) to 0.65, and the effective interest rate also drops.
- 30-year fixed rate jumbo mortgage (loan balances over $766,550), the average interest rate was 7.04%, down from 7.21% the previous week. Although the points for an 80% LTV loan increased from 0.36 (including origination fee) to 0.38, the effective interest rate also decreased.
- 30-year fixed rate interest rate Federal Housing Administration Mortgage The average was 6.77%, down from 6.86% the previous week. Although the points for an 80% LTV loan increased from 0.90 (including origination fee) to 0.95, the effective interest rate also decreased.
- for 15-year fixed-rate mortgageThe average interest rate was 6.37%, down from 6.66% the previous week. Although the points for an 80% LTV loan increased from 0.67 (including origination fee) to 0.77, the effective interest rate also decreased.
- The price is 5/1 ARM Loan The average increase was 6.38%, the same as the previous week. Points for an 80% LTV loan dropped from 0.67 (including origination fee) to 0.52, and the effective interest rate dropped.
The “gap” between conforming mortgage rates and jumbo mortgage rates has grown wider this year as concerns about commercial real estate lending weigh on regional banks that are home to the oversized Fannie Mae and Freddie Mac Major provider of large home loans.
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