- The average contract interest rate for 30-year fixed-rate mortgages of $510,400 or less increased to 3.49% from 3.47%.
- Applications to refinance a home loan dropped 19% from the previous week but were 144% higher than a year ago.
- Mortgage applications to purchase a home continued their sharp decline, falling 12% for the week and 33% year to year.
Consumers are fast losing confidence in this spring housing market, given the economic upheaval from the coronavirus. Higher mortgage rates aren't helping either.
Both combined to cause a 17.9% drop in mortgage applications last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
Refinance activity had bounced back the week before, after a sharp drop in rates, but those rates didn't hold.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 rose to 3.49% from 3.47%. Points decreased to 0.28 from 0.33, including the origination fee, for loans with a 20% down payment.
Applications to refinance a home loan fell 19% from the previous week but were 144% higher than a year ago. Rates were 91 basis points higher year to year.
"Given the ongoing rate volatility, along with the persistent lack of liquidity in certain sectors of the [mortgage-backed securities] market, we expect to see continued weekly swings in refinance activity," said Joel Kan, the association's associate vice president of economic and industry forecasting. "With much less liquidity and tighter credit in the jumbo market, average loan sizes declined, and mortgage rates for jumbo loans increased to a high last seen in January."
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances greater than $510,400 increased to 3.87% from 3.84%, with points decreasing to 0.26 from 0.31, including origination fee, for loans with 20% down.
Mortgage applications to purchase a home continued their sharp decline, falling another 12% for the week and 33% year over year. The numbers were far worse in states hardest hit by COVID-19. Purchase applications fell 47.5% annually in California, 55.4% in New York and 59.9% in Washington state.
Sentiment among buyers is weakening dramatically, as job losses mount and the stock market remains extremely volatile. Almost half of buyers surveyed by realtor.com at the end of March said they were less optimistic about home buying, and 37% of buyers looking to buy in the next six months reported having to postpone their purchase as a result of the pandemic.
As for sellers, 44% planned to postpone their sale and 60% felt less optimistic about home selling as a result of the coronavirus, according to the survey.
As the mortgage market struggles to handle the onslaught of requests for loan forbearance, it is now getting more difficult to obtain a new home loan. Lenders are tightening their underwriting significantly, and some refinance applications that were being processed have been dropped as applicants lose employment or income.