As December drew to a close, a sudden surge in mortgage interest rates left the housing market reeling at its most sluggish time. The Mortgage Bankers Association reported a significant drop in total mortgage application volume, reflecting the impact of the rising rates.
Here are the key points to consider in light of this development:
- Total mortgage application volume for the two weeks ending Dec. 27, 2024, plummeted by 21.9% compared to the previous week, following adjustments made for the Christmas holiday.
- The average contract interest rate for 30-year fixed-rate mortgages increased to 6.97%, with points rising to 0.72, a significant jump from the previous week. This increase brought mortgage rates 21 basis points higher compared to the previous year.
- Mike Fratantoni, chief economist at the MBA, noted that the surge in rates had a natural impact on both refinance and purchase applications. In fact, applications to refinance a home loan dropped by 36% from the previous two weeks but still remained higher compared to the previous year.
- While applications for mortgage purchases also decreased by 13% during this period, the annual comparison revealed a notable 17% decline. This downtrend suggests a considerable weakness in the market, despite an increase in available homes on the market.
In conclusion, as mortgage rates tip past 7% at the start of the following year, the housing market faces challenges amid the holiday-induced market volatility. It remains to be seen how this surge in interest rates will impact the real estate sector in the coming months.
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