Skip to main content

Mortgage Rates Ease, But Soaring Prices Keep Buyers, Refinancers Sidelined - MBA

“Most refinance borrowers continue to remain on the sidelines as a result, and refinance applications have fallen in nine of the past 10 weeks," said the MBA's Joel Kan.

U.S. mortgage rates fell for the second time in succession last week, an industry lobby group said Wednesday, but financing demand remains muted as borrowing costs hover at the highest levels in a decade and new home prices continue to soar. 

The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $647,200 fell 3 basis point to 5.46% for the week ending on May 20, a move that still leaves the benchmark rate near the highest since December of 2018. Freddie Mac's 30-year fixed-rate mortgage rate moved past 5% for the first time since 2011 in April, the nation's biggest mortgage buyer said earlier this month.

The Market Composite Index, a measure of mortgage loan application volume, fell 1.2% while the MBA's seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single-family home, rose 0.2%. The MBA's refinancing index slumped 3.9% as homeowners backed away from accessing higher rates. 

“Most refinance borrowers continue to remain on the sidelines as a result, and refinance applications have fallen in nine of the past 10 weeks," said Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “Higher mortgage rates are also impacting purchase market conditions, as the purchase index remained close to lows last seen in the spring of 2020 when a significant portion of activity was put on hold due to the onset of the pandemic."

Scroll to Continue

TheStreet Recommends

"Currently, higher rates, low inventory, and high prices are keeping prospective buyers out of the market,” he added. 

The median April new home price was pegged 19.6% higher from last year, at $450,600, the Commerce Department reported Tuesday, even as new home sales fell 16.6% from March, the most in nine years, to an annualized rate of 591,000 units.

Rising prices might not indicate housing market health, however, and with new mortgage application down sharply from the start of the year, Pantheon Macroeconomics analyst Ian Shepherdson thinks the April downturn is just the start. 

"We doubt this marks the floor for new home sales, because mortgage applications are still falling, and they usually lead sales," he said, noting that "people who had previously applied for a mortgage are now having second thoughts; no one wants to be the last buyer in a market heading south."

Earlier this month, online relator Zillow Group  (ZG) - Get Zillow Group Inc. Report forecast softer-than-expected near-term revenues amid a surge in residential mortgage rates that could trigger a broader slowdown in the housing market.

"With forecasts varying widely, one thing that is clear about the 2022 housing market is that the path ahead is uncertain." Zillow said in a letter to shareholders. "While it's clear people still have a strong interest in moving, total consumer transaction value growth trends are softening."